Gold prices fell on Wednesday as the dollar strengthened, with investors eagerly anticipating a key U.S. inflation report expected later this week. This report is likely to provide more insight into the potential for a September interest rate cut by the Federal Reserve.
Spot gold decreased by 0.4% to $2,514.11 per ounce as of 0313 GMT. The precious metal had previously reached a record high of $2,531.60 on August 20. Meanwhile, U.S. gold futures also saw a decline, dropping 0.2% to $2,549.00 per ounce.
The dollar index gained 0.1%, making gold less attractive for investors holding other currencies. Kelvin Wong, senior market analyst for Asia Pacific at OANDA, commented, “The market seems to be waiting for a catalyst to ignite the potential bullish breakthrough above the $2,532 level.”
While the short-term outlook for gold remains positive, with potential to reach new highs, Wong noted that the metal could face resistance in the longer term around the $2,585 to $2,595 range.
Investors are particularly focused on the upcoming release of the U.S. personal consumption expenditures (PCE) data on Friday. The PCE is the Federal Reserve’s preferred measure of inflation and could influence the central bank’s decision on interest rates.
According to the CME FedWatch tool, traders are already factoring in a Fed rate cut next month, with a 67% probability of a 25-basis-point reduction and a 33% chance of a larger 50-basis-point cut. Gold, which does not yield interest, typically performs well in a low-interest-rate environment.
Last week, Federal Reserve Chair Jerome Powell signaled support for an imminent start to rate cuts, expressing confidence that inflation is approaching the central bank’s 2% target.
On Tuesday, a report indicated that U.S. consumer confidence reached a six-month high in August, though concerns about the labor market are growing among Americans.
In other market news, China’s net gold imports via Hong Kong increased by approximately 17% in July compared to the previous month, marking the first rise since March, according to data released on Tuesday.
Among other precious metals, spot silver dropped 0.7% to $29.78 per ounce, platinum edged up 0.3% to $956.00, and palladium decreased 0.4% to $966.40 per ounce.