Gold prices log highest finish since early August as traders await U.S. inflation, labor-market data

By Myra P. Saefong and Joseph Adinolfi

Silver, platinum and palladium end lower for the session

Gold futures settled at their highest price since early August on Wednesday, buoyed by some weakness in the U.S. dollar and Treasury yields, as traders awaited more data on the U.S. labor market.

Price action

Market drivers

Gold prices got a boost following the latest batch of softer-than-expected U.S. economic data, which has helped bolster investors' hopes that the Federal Reserve might forego more interest rate hikes.

The U.S. grew at a somewhat slower 2.1% annual pace in the second quarter revised figures, released Wednesday, show. That's down from an initial 2.4% GDP growth.

A batch of softer-than-expected data on U.S. job openings and consumer confidence helped support stocks and gold on Tuesday. Prior to that, a batch of weak PMI survey data out of the U.S. and Europe last week helped support the notion that the U.S. economy might finally be slowing, even as the Atlanta Fed's GDP NowCast expects the U.S. economy to expand by nearly 6% in the third quarter.

Given how several more key U.S. economic indicators are scheduled this week, "gold could experience a rapid change of fortune if they all disappoint and raise questions around how much headroom the Fed has left to keep raising rates," Lukman Otunuga, manager, market analysis, at FXTM told MarketWatch.

All eyes will be on the nonfarm payrolls report Friday, he said. "Given the Fed's shift to data dependence, this report could spark explosive levels of volatility across the board." PCE inflation data for July will also be released on Thursday.

Traders are currently pricing in an 11.5% probability of a 25 basis point hike at the September meeting, with this rising to 44.1% by November, according to the CME FedWatch Tool. "The pending jobs report is likely to influence these expectations, ultimately impacting gold prices," said Otunuga.

-Myra P. Saefong

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08-30-23 1411ET

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