Quick overview

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Gold rose on Friday as expectations for US inflation data were met, supporting speculation that the Fed may continue to lower interest rates later this year.  Spot gold was up 0.8 percent to $3,778.62 per ounce following a record high of $3,791 earlier in the week.

The bullion metal increased by roughly 2.1% this week. Personal income and spending were a tenth above expectations, but US gold futures for December delivery settled 1% higher at $3,809, while the monthly PCE data is in line.

The US Personal Consumption Expenditures (PCE) price index increased 2.7 percent year-over-year in August, which was in line with economists’ expectations in a Reuters poll. Despite this data, the Fed will still proceed with another cautious rate cut at its October meeting.

The CME FedWatch Tool now shows an 88 percent chance of a rate cut in October and a 65 percent chance of another in December. Commerzbank’s commodity analyst Barbara Lambrecht said that while gold prices are still rising and drawing significant ETF inflows, high prices are hurting physical demand as net imports from Hong Kong fell 39% month over month, and China’s August imports fell 34% month over month.

While some people are attracted to the steadily rising prices and gold ETFs are experiencing significant inflows (as we previously reported), others are being put off by high prices: China’s gold imports in August were 3 percent lower than the previous month.

The decline in Hong Kong’s net gold imports was even more severe, dropping 39% to just under 27 tons from July. An ounce of gold is reportedly being sold by gold dealers for the biggest discounts since May 2020, with prices ranging from $21 to $36.