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Gold Erases Weekly Loss as Traders Mull Data, Fed Rate Cut Bets

A selection of gold bars and one-ounce gold coins arranged at Gold Investments Ltd. bullion dealers in London, UK, on Tuesday, May 21, 2024. Gold slipped — after hitting an all-time high in the previous session — with investors assessing recent hawkish commentary from Federal Reserve officials that downplayed the possibility of imminent rate cuts. Photographer: Chris Ratcliffe/Bloomberg (Chris Ratcliffe/Bloomberg)

(Bloomberg) -- Gold erased a weekly decline as traders assessed the latest US data and their bets on the size of the Federal Reserve’s expected interest rate cuts for the rest of the year. 

A measure of prices paid to US producers was unchanged in September, restrained by declines in gasoline, suggesting further progress toward tamer inflation. Consumer sentiment unexpectedly fell for the first time in three months as lingering frustration with a high cost of living offset more sanguine views of the job market.

The readings added to a batch of mixed US economic data this week, with bond traders becoming less convinced that the US central bank will need to deploy further monetary easing this year. Traders are pricing in roughly 20% odds that the Fed holds rates steady in either November or December. Lower interest rates typically benefit gold, as the metal doesn’t pay interest.

However, Fed policymakers John Williams, Austan Goolsbee and Thomas Barkin were unfazed by a higher-than-forecast September inflation report on Thursday, suggesting officials can continue lowering rates.

The precious metal is up more than 25% this year, with rate-cut optimism fueling recent gains. Strong central bank purchases and heightened geopolitical tensions have also supported gold. Hostilities in the Middle East have intensified, stoking haven demand, with investors on edge as Israel plans its retaliation against Iran.

Spot gold rose 1.1% to $2,657.48 an ounce as of 11:34 a.m. in New York, on track for a weekly gain of 0.2%. The Bloomberg Dollar Spot Index was flat. Silver and platinum advanced, while palladium slipped.

--With assistance from William Clowes.

©2024 Bloomberg L.P.