Gold's value remained relatively stable, waiting for additional guidance from the Federal Reserve.
The US Federal Reserve (Fed) announced a change in monetary policy in July 2020, with Chairman Jerome Powell indicating a more flexible approach to interest rates. This new approach allows for the possibility of lowering rates starting from the September meeting, with the intention to adapt policy based on evolving risks to the labor market and inflation.
The Fed's decision to cut interest rates by 25 basis points on Wednesday was followed by a 'risk-management cut' in response to the weakening labor market, as characterized by Powell. However, the Fed tempered its message with warnings of sticky inflation, creating doubt over the pace of future easing.
Gold prices reached a record high of $3,707.40 on Wednesday, only to flatten out on Friday, remaining unchanged at $3,646.23/oz by 3.11am GMT. The surge in gold prices was mirrored by a rise in spot silver, which rose 0.7% to $42.11/oz.
Meanwhile, platinum gained 0.2% to $1,386.10, while palladium, up 0.6% at $1,157.49, is headed for a weekly fall, losing 3.3% so far this week. US gold futures for December delivery were also flat at $3,678.90.
Capital.com analyst Kyle Rodda stated that sentiment for gold remains bullish but has cooled off. Rodda suggested that weak US data would be needed to reverse the current dynamic for gold to make another solid run above $3,700.
Traders are pricing in a 92% chance of another 25bp cut at the Fed's October meeting. Despite this, the Fed has forecasted only one cut in 2026, a forecast that is above market pricing, causing an increase in yields and the dollar.
In other economic news, the number of Americans filing new applications for unemployment benefits fell last week, offering a glimmer of hope in the struggling labor market.
The Fed finds itself in a 'meeting-by-meeting situation' regarding the rate outlook, indicating a cautious approach to future interest rate decisions. The volatile gold prices and the uncertain monetary policy environment are likely to keep investors on their toes in the coming months.
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