Gold price set for best month since April

[Ben Graham]

Gold prices advanced to near-record levels on Friday as investors weighed US economic data and uncertainty around the Federal Reserve’s future.

Spot gold rose 0.8% to $3,445.87 per ounce as of 12:40 p.m. ET, on track for its best month since April. US gold futures jumped 1.1% to $3,513.50 per ounce, just $20 short of a new record high.

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The gains come off the back of fresh US data that showed stubborn inflation, as personal consumption expenditures — the Fed’s favored price index — remained well above policymakers’ comfort zone. Still, US consumer spending rose in July by the most in four months, indicating healthy demand.

Traders have increased their bets on a 25-basis point rate cut by the US central bank at its September meeting to an 89% probability, up from 85% before the data came out. A Fed rate cut would bode well for precious metals like gold, which yields no interest.

“We have expectations of a Fed rate cut, or potentially two, throughout this year, (which is) generally supportive for commodity prices across the board, including gold and silver,” David Meger, director of metals trading at High Ridge Futures, told Reuters on Friday.

Fed’s uncertain future

Meanwhile, questions surrounding the Federal Reserve’s independence continue to linger, following US President Donald Trump’s unprecedented move earlier this week to fire governor Lisa Cook. In an emergency hearing Friday, a federal judge said they will consider issuing an order to block the firing.

“Gold is benefiting from this uncertainty (around Fed independence), as shown by inflows into gold ETFs of just under 15 tons in the last two days. Nevertheless, the upside for gold above $3,400 is looking increasingly limited,” Commerzbank wrote in a note.

“Another layer of geopolitical uncertainty related to risks around the Fed and overall institutional independence is moving flows into gold,” Frank Monkam, head of macro trading at Buffalo Bayou Commodities, said in a Bloomberg interview.

Expectations for more bullion buying from central banks in September also supported the market, Monkam added.

As the go-to haven asset amid political and economic turmoil, gold has risen more than 30% so far this year, including setting an all-time high of $3,500 in April.

(With files from Bloomberg and Reuters)