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Gold prices fell below $2,500 an ounce on Friday as Treasury yields and the dollar rose after U.S. inflation data came in line with expectations, reinforcing the likelihood that interest rate cuts will be carried out at a measured pace.
Department of Commerce data showed the personal consumption expenditures price index, considered the Federal Reserve's favorite gauge of inflation, rose 0.2 percent last month, in line with economists' forecasts.
The data supports the Fed's intentions to begin easing monetary policy as early as its next meeting in September, with most market watchers expecting the size of the first rate cut to be a modest 25 basis points.
Investors will now look to the future “Next week's U.S. nonfarm payrolls report will cement whether or not there will be a 50-basis point or 25-basis point rate cut at the September meeting,” Blue Line Futures chief market strategist Phillip Streible said, according to Reuters.
Next month Comex gold (XAUUSD:CUR) for September delivery settled -1.2% at $2,493.80/oz and ended 0.7% lower on the week, but the front-month price gained 2.7% on the month, its sixth consecutive monthly gain; gold is up 21% YTD and is slightly below yesterday’s all-time settlement high of $2,525.70.
Silver maturing next month in September (XAGUSD:CUR) closed -2.8% On Friday, although it lost 3.6% for the week but only 0.1% for the month, but still its third consecutive monthly loss, silver is up 20% so far this year.
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TD Securities strategist Daniel Ghali said he anticipates Short-term decline for gold as “positioning signals are flashing red on several fronts,” with macro funds’ positions particularly extreme, as Bloomberg reported.
“Systematic trend followers are effectively in maximum buy position,” according to Ghali. “We also believe that Shanghai positioning is near its all-time highs… despite the fact that physical demand in China has been quite weak and so have Chinese gold ETF inflows.”
A move lower towards $2,430 an ounce could trigger a sell-off, Ghali said.
