Gold prices edged higher on Monday as investors reassessed the likelihood of US interest rate cuts ahead of a key inflation report due later this week.
Spot gold increased by 0.8% to $2,3452.52 per ounce as of 13:45 GMT, while the continuous futures contract for U.S. gold rose 0.75% to $2,351.90 on the NYMEX.
Although bullion reached a record high of $2,449.89 last week, the gold price has since fallen by over $100.
UBS analyst Giovanni Staunovo offered his thoughts on the gold price in a comment to Reuters:
"Gold has suffered from more hawkish perceived comments from Fed officials and better-than-expected U.S. economic data, with market participants shifting again back the timing of the first Fed rate cut”.
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Minutes from the Federal Reserve's latest policy meeting indicated that inflation might take longer to fall to the 2% target — meaning the US central bank may keep interest rates “higher for longer” to tame rising prices.
Fed Governor Christopher Waller mentioned on Friday that a key underlying interest rate influencing monetary policy could rise in the future after years of decline, adding that it was too early to say if that would happen.
While gold is traditionally seen as a hedge against inflation, higher interest rates increase the opportunity cost of holding the non-yielding asset.
Investors are now focused on the upcoming personal consumption expenditures (PCE) price index, the preferred inflation gauge of the US Federal Reserve, due on Friday.
According to the CME FedWatch tool, traders currently see a roughly 61% chance of a Fed rate cut in November, down from about 63% on Friday.
"We expect gold prices to stay volatile, and price setbacks to be shallow, targeting gold prices to test new record highs later this year," Staunovo added.
Spot silver climbed 1.5% to $30.80, after reaching an 11-year high last week.
"Silver has outperformed gold this year, and this trend is likely to continue," Staunovo told Reuters.
At the time of writing on Monday, the spot gold price was up close to 0.8%, trading around the $2,350 mark.
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