Gold prices inched higher during Friday's Asian session, but remained on course for a weekly loss, as stronger-than-expected United States inflation data dented market hopes for a super-sized 50-basis-point (bp) interest rate cut by the Federal Reserve in September.
By 3:15 pm AEST (5:15 am GMT) spot gold added $10.07 or 0.3% to US$3,345.08 per ounce. Despite the slight uptick, bullion has fallen 1.8% so far this week.
The U.S. producer price index (PPI) rose 3.3% year-on-year in July, beating forecasts of a 2.5% increase, the Labor Department reported on Thursday.
Weekly jobless claims also came in stronger than expected, at 224,000 versus market estimates of 228,000.
In contrast, U.S. consumer prices increased only marginally in July, providing some support for rate-cut expectations.
However, the hotter-than-anticipated PPI reading has dampened prospects of an aggressive easing cycle, making a 50 bps cut less likely at the Fed’s next meeting.
St. Louis Fed President Alberto Musalem reinforced that view, saying a half-point cut in September was not warranted, just a day after Treasury Secretary Scott Bessent noted that such a move was still possible.
Gold, which does not yield interest, typically benefits from a lower-rate environment as it reduces the opportunity cost of holding the metal.
On the geopolitical front, investors are downplaying the likelihood of a major breakthrough in efforts to end the war in Ukraine from Friday’s meeting between U.S. President Donald Trump and Russian President Vladimir Putin, despite some signs of progress in talks.
