Gold heads for weekly loss as US inflation dampens hopes for big rate cut

SINGAPORE: Gold prices were on track for a weekly drop on Friday after stronger-than-expected US inflation data reduced the chances of a larger Federal Reserve rate cut in September.

Spot gold edged up 0.1 percent to $3,339 an ounce at 0244 GMT, but the metal has fallen 1.8 percent over the week. US gold futures for December delivery were little changed at $3,384.

Tim Waterer, chief market analyst at KCM Trade, said gold was still reacting to Thursday’s US producer price index (PPI) data, which raised doubts over how much the Fed might lower rates this year.

The PPI rose 3.3 percent year-on-year in July, above the 2.5 percent increase forecast by analysts, according to the US Labor Department. Weekly jobless claims also came in lower than expected, at 224,000 compared to the 228,000 anticipated.

While consumer prices increased only slightly in July, fuelling hopes for a rate cut, the hotter PPI reading made it less likely that the Fed would approve a half-point reduction at its next meeting.

Waterer warned that if the jump in wholesale prices becomes a trend and pushes consumer prices higher, expectations for US rate cuts could weaken, which would weigh on gold’s appeal from a yield perspective.

Adding to the cautious outlook, St. Louis Fed President Alberto Musalem said a 50-basis-point cut in September was not justified. His comments came a day after Treasury Secretary Scott Bessent suggested such a move was possible.

Gold generally benefits from lower interest rates, as it does not offer any yield.

Geopolitics and other precious metals

In global politics, investors are showing limited optimism for a breakthrough in talks aimed at ending the war in Ukraine. The meeting between Donald Trump and Vladimir Putin on Friday is drawing attention, but most market watchers are not expecting a major shift despite some hints of progress.

Among other precious metals, spot silver dipped 0.2 percent to $37.91 an ounce, platinum slipped 0.2 percent to $1,354.94, and palladium fell 0.3 percent to $1,142.51.

Gold price in Pakistan

In Pakistan, gold prices fell on Wednesday, with 24-karat gold trading at Rs358,100 per tola, down Rs200.

The price of 24-karat gold per 10 grammes stood at Rs307,013 after a decrease of Rs171, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). The rate for 22-karat gold was reported at Rs281,438 per 10 grammes.

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