(Bloomberg) -- Gold edged up to near a record, as investors awaited key inflation data that could prompt the U.S. Federal Reserve to cut interest rates next month.
Bullion reached as high as US$2,478.61 an ounce – within roughly $5 of its record set last month – with traders looking to the Consumer Price Index data later Wednesday for more clues on the Fed’s rate path. Lower rates are traditionally seen as bullish for non-interest bearing gold.
The U.S. Producer Price Index report published Tuesday fell short of economists’ expectations and indicated inflationary pressures were moderating, reinforcing expectations of a rate cut. Fed Bank of Atlanta President Raphael Bostic said he’s looking for “a little more data” before supporting a reduction in rates, while reiterating he’ll likely be ready to cut “by the end of the year.”
The Fed “has the benefit of a second set of numbers in the first half of September, so the August numbers will set the scene, but will not be pivotal,” said Rhona O’Connell, an analyst at StoneX.
Beyond the inflation figures, there are strong tailwinds for gold, which “continues to be supported amid the ongoing geopolitical uncertainties and expectations of interest-rate cuts from the U.S. Fed,” said Ewa Manthey, a commodities strategist at ING Bank NV. “Yesterday’s data reinforced the view that the Fed will be able to cut soon.”
Gold is up about 20 per cent this year amid mounting optimism on monetary easing and large purchases by central banks. It’s also seen support from increased haven demand from geopolitical risks, including tensions in the Middle East and Russia’s conflict with Ukraine.
Spot gold rose 0.3 per cent to $2,473.25 by 10:51 a.m. in London. The Bloomberg Dollar Spot Index edged down. Silver was little changed, while platinum and palladium rose.
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