Gold prices edged higher Thursday, trading close to a two-week peak as investors increased wagers that the Federal Reserve will cut interest rates in September.
At 09:00 ET (13:00 GMT), spot gold rose 0.1% to $3,398.42 an ounce, while October futures gained 0.3% to $3,456.90. The modest rise reflects a broader shift in market sentiment as traders bet on easier monetary policy despite political turmoil surrounding the Fed.
The move follows President Donald Trump’s attempt to remove Fed Governor Lisa Cook, a decision now facing legal pushback. While the outcome remains uncertain, the episode intensified market expectations for Fed action next month.
Markets Price In September Cut
The odds of a September rate cut have grown markedly over the past week. According to CME FedWatch data, futures markets now assign an 84.9% probability of a 25-basis-point reduction, up from 78.4% previously.
Chair Jerome Powell acknowledged signs of labor market cooling in remarks last week but stopped short of committing to policy easing. He highlighted ongoing risks from trade and fiscal policies, underscoring the Fed’s cautious stance.
Despite Powell’s restraint, traders see growing room for a rate cut:
- Dollar weakness this week buoyed precious metals.
- Platinum slipped 0.1% to $1,347.25/oz.
- Silver gained 1.2% to $39.19/oz.
- Copper rose 0.5% on both LME and COMEX, to $9,812/ton and $4.5185/lb.
Lower borrowing costs typically support gold and other non-yielding assets by reducing the opportunity cost of holding them.
Strong GDP, PCE Data Ahead
Adding to the policy debate, fresh data showed the U.S. economy expanded by 3.3% in Q2, stronger than the prior 3.0% estimate. The growth rebound from a 0.5% contraction in Q1 highlights resilience in the world’s largest economy.
However, attention is shifting to the July PCE Price Index, due Friday. The Fed’s preferred inflation gauge is expected to confirm inflation holding above the 2% annual target, complicating the case for immediate easing.
Key data in focus:
- Q2 GDP: +3.3% vs. +3.0% first estimate.
- PCE Price Index (July): expected steady above 2%.
- Fed Meeting (September): markets pricing in 85% cut odds.
With rate cut bets mounting and inflation still sticky, gold remains positioned near its highs, as investors weigh policy uncertainty against stronger economic fundamentals.