Spot Gold extends gains as data cements Fed cut expectations

Spot Gold extended the gains from the prior trading session on Friday, after fresh macro data cemented expectations of a Federal Reserve rate cut in November.

Yesterday an official report showed that annual headline inflation in the US had eased for a sixth straight month, to 2.4% in September. It has been the lowest inflation rate since February 2021.

At the same time, the number of initial jobless claims rose to 258,000 during the week ending October 5th, or the highest number in 14 months and also above market consensus of 230,000.

Investors are now expecting the US producer price inflation report for September due out at 12:30 GMT.

“Gold is seeing short-term gains as recent data has been positive. If the PPI data comes in softer, gold’s momentum could continue upward,” Kelvin Wong, OANDA’s senior market analyst for Asia Pacific, was quoted as saying by Reuters.

“From a technical view point, in the near-term, gold could retest $2,657 and if it breaks above that, then test levels near its all-time high.”

Markets are now pricing in about an 84% chance of a 25 basis point rate cut at the Federal Reserve’s policy meeting in November, compared to a 76% chance before the data string.

Lower interest rates reduce the opportunity cost of holding Gold, which pays no interest.

As of 7:16 GMT on Friday Spot Gold was gaining 0.47% to trade at $2,642.18 per troy ounce.

Gold Futures for delivery in December were gaining 1.22% on the day to trade at $2,658.15 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.05% to 102.934 on Friday.