Gold Prices Rise Amid Weaker US Economic Data and Rate Cut Speculation

Gold prices inched higher on Thursday following softer-than-expected U.S. economic data, raising hopes that the Federal Reserve might cut interest rates as early as September. Spot gold rose 0.3% to $2,362.10 per ounce by 0200 GMT, after reaching a nearly two-week high in the previous session. U.S. gold futures remained relatively stable at $2,369.80.

Economic Indicators Point to Slowing Economy

Wednesday’s economic reports, including weak services and ADP employment data, indicated a slowing U.S. economy. Additionally, there was an increase in initial applications for unemployment benefits last week, further reinforcing the signs of economic deceleration. Traders are now eagerly awaiting the U.S. nonfarm payrolls (NFP) data, which is due on Friday.

“A softer-than-expected ISM services report was the gift that Fed doves have been waiting for ahead of an NFP. A move to $2,400 is on the cards should NFP confirm the economic cracks we’re seeing elsewhere,” commented Matt Simpson, senior analyst at City Index.

Impact on the Dollar and Gold

The weakening dollar made gold, which is priced in the greenback, cheaper for holders of other currencies. This has led to increased demand for gold. Markets are currently pricing in a 74% chance of the Fed cutting interest rates at its September meeting, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.

“I doubt we’ll be seeing the U.S. dollar index retest 106 any time soon, so we expect traders to fade into dollar bounces and buy dips on gold,” Simpson added.

Federal Reserve’s Stance

Minutes from the Federal Reserve’s June 11-12 meeting revealed that officials acknowledged the U.S. economy appeared to be slowing but recommended a wait-and-see approach before committing to rate cuts.

Performance of Other Precious Metals

Spot silver saw a slight increase of 0.2% to $30.54, while platinum added 0.5% to reach $1,002.28. In contrast, palladium fell 0.6% to $1,023.23 after reaching its highest level since mid-April in the previous session.

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