Gold retreats as US yields firm; market awaits further Fed guidance

Much of positive news for gold may have been priced in- Commerzbank

By Reuters

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Published: Tue 27 Aug 2024, 8:10 PM

Gold prices fell on Tuesday, weighed down by higher U.S. bond yields, as markets await inflation data that could shed light on the scale of an expected interest rate cut from the Federal Reserve next month.

Spot gold fell 0.1% to $2,515.09 per ounce, as of 11:37 a.m. ET (1537 GMT), having eased from the record high of $2,531.60 hit last week. U.S. gold futures eased 0.2% to $2,550.40.

"You're seeing some profit-taking by the shorter-term speculators after the recent gains... We do have some outside market forces today that are maybe a little bit negative, which would mean an uptick in bond yields," Jim Wyckoff, senior market analyst at Kitco Metals, wrote in a note.

The benchmark U.S. 10-year yields rose, making the non-yielding bullion less attractive for overseas buyers.

Investors now await data for the Personal Consumption Expenditures (PCE), a key inflation report and the Fed's preferred inflation gauge, on Friday.

A surprise of hotter-than-expected inflation data could slightly influence the Fed's policy, but its assured they will cut interest rates in September and possibly again this year, Wyckoff added.

Traders see a 65.5% chance of a 25-basis-point (bp) rate cut in September and about a 34.5% probability of a bigger 50-bp reduction, according to the CME FedWatch tool.

Bullion remains above the $2,500 per-ounce psychological level and is heading for its best year since 2020, driven by investor optimism about upcoming U.S. rate cuts and lingering concerns about the Middle East conflict.

"Much of the positive news for gold may therefore already have been priced in. We feel vindicated in our view that gold has no significant upside potential for the time being," Commerzbank wrote in a note.

"We see more room for the three other precious metals that have not caught up with gold in recent weeks"

Among other metals, spot silver rose 0.1% to $29.93 per ounce, while platinum was down 0.8% to $953.98 and palladium gained 1.1% to $969.61.