- The Federal Reserve will probably maintain interest rates at their current levels throughout this year.
- The US PCE index increased by 0.2% last month, mirroring the gain in June.
- Weekly initial jobless claims dipped by 4,000 to 228,000 last week.
Gold declined on Thursday, marking another month of losses. As-expected US inflation figures and weaker job data reinforced the anticipation that the Federal Reserve will maintain interest rates at their current levels throughout this year.
The price of gold settled down by 0.36% at $1,965.9 per ounce, concluding the month with a 2.16% decrease, marking its third negative month in four.
US Core PCE price index (Source: Bureau of Economic Analysis)
As indicated by the personal consumption expenditures price index, inflation increased by 0.2% last month, mirroring the gain in June. Over the 12 months leading up to July, the PCE price index climbed by 3.3%, following a 3.0% increase in June.
Sroka noted, “The PCE data aligns with what most were expecting, and now we have the employment report tomorrow, followed by CPI and PPI as we approach the next Fed meeting. Employment has been the key element the Fed has been waiting for. The Federal Reserve has emphasized the need for increased unemployment and more labor market slack to alleviate wage pressures. So far, we haven’t observed these developments.”
US consumer spending, which constitutes over two-thirds of the nation’s economic activity, accelerated in July. Meanwhile, weekly initial jobless claims declined by 4,000 to 228,000, compared to a four-week average of 237,500.
Bob Haberkorn, senior market strategist at RJO Futures, commented that while the numbers were “not terrible,” they were also “not great,” potentially suggesting that the Federal Reserve might consider halting interest rate hikes early next year. Haberkorn added that gold is currently in a wait-and-see mode, and a decline in bond yields could boost demand for bullion.
US Treasury yields remained mostly stable, with a slight decrease, while the dollar briefly trimmed its gains before rebounding after the release of economic data.
According to the CME Group’s FedWatch tool, there is an 88.5% probability that the Fed will leave rates unchanged in September and a 56% likelihood of a pause in November.
Investors eagerly anticipate the forthcoming non-farm payroll data, scheduled for Friday, which might provide more comprehensive insights into the Federal Reserve’s potential monetary course.