TLDR
- Gold rebounded 0.8% to around $4,351 after falling nearly 2% the previous session
- Markets are pricing a roughly 70% chance of a Fed rate hike next week
- U.S. producer prices rose 0.4% in August, fueling inflation concerns
- Gold ETFs saw $18 billion in inflows in August, their second largest monthly record
- Copper pulled back after hitting an all-time high above $14,800 a metric ton
Gold prices bounced back on Friday after a sharp drop, but the precious metal is still on track for its third straight weekly loss as inflation data and rate hike expectations keep pressure on.
Spot gold rose 0.8% to $4,351.28 an ounce in early trading. Gold futures slipped 0.4% to $4,391.37. Silver gained 0.8% to $64.10 an ounce, and platinum rose 1.1% to $1,801.18.
Gold is set to fall more than 2% for the week. The main drivers are rising oil prices, higher bond yields, and growing bets that the Federal Reserve will raise interest rates at its meeting next week.
U.S. producer prices rose 0.4% in August, matching expectations and marking the strongest monthly increase since May. The data added to worries that energy costs are pushing inflation higher.
Markets are now pricing a roughly 70% chance of a Fed rate hike this week, according to the CME FedWatch tool.
Middle East Conflict Pushes Oil Higher
Oil is a big part of the inflation story right now. Brent crude climbed close to $108 a barrel as tensions between the United States and Iran continued to escalate.
Fighting has intensified in recent weeks. The U.S. has struck Iranian oil tankers, Iran has launched missiles at a Jordanian airbase, and Houthi fighters in Yemen have attacked Saudi infrastructure.
Continued disruptions to oil supplies could keep inflation elevated, giving the Fed more reason to keep rates restrictive.
All eyes now turn to Friday’s consumer price index report. Economists expect headline CPI to rise 0.4% month on month and 3.4% year on year in August. Core CPI is expected to rise 0.2% from July.
Gold ETFs Hit Record Holdings
Despite the short-term pressure on prices, investor demand for gold remains strong. The World Gold Council reported that global physically backed gold ETFs pulled in $18 billion in August, the second largest monthly inflow on record.
Holdings rose by 121 tonnes to a record 4,189 tonnes. Assets under management jumped 16% to $615 billion.
That demand helped gold gain 13% in August, its third strongest monthly return in 25 years.
Still, analysts say gold needs to reclaim its 200-day moving average near $4,537 to signal the pullback is ending. Until then, some analysts see prices possibly falling toward $4,200.
Copper also saw sharp moves this week. Three-month futures on the London Metal Exchange hit a record above $14,800 a metric ton before pulling back. Futures were last up 0.3% at $14,233 a ton.
Analysts at Sucden Financial said the possibility that U.S. tariffs may not move forward triggered a quick unwind in copper positions, though tight supply should limit deeper losses.
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