Gold edged higher on Wednesday but remained on track for a monthly decline as traders awaited the U.S. core PCE inflation report, the Federal Reserve's preferred gauge. The metal's near-term direction hinges on whether the data reinforces expectations for further rate hikes this year.
Spot gold rose 0.1% to $4,187.64 an ounce, while gold futures gained 1.0% to $4,219.30 an ounce. Despite Wednesday's uptick, spot gold has fallen roughly 6% over the past month.
Inflation data looms over rate outlook
The core personal consumption expenditures index for August is expected to accelerate to 0.3% month-on-month from 0.2%, while the overall reading is tipped to rise to 0.4% from 0.2%. On a year-on-year basis, core PCE is projected at 3.3% and the overall measure at 3.7%, matching July's pace but still well above the Federal Reserve's 2% target.
Higher rates dent the appeal of non-yielding assets like gold, so the PCE print carries weight for the metal's direction. According to David Morrison, Senior Market Analyst at Trade Nation, Wednesday's release "has the potential to shake things up a bit".
Fed officials split on the path ahead
The Fed raised rates by a quarter of a percentage point earlier this month to address mounting inflation pressures. New York Fed President John Williams said this week there may not be urgency to raise rates again immediately in October. Yet all but two of the 18 officials on the Federal Open Market Committee's latest rate forecasts called for at least one more increase this year.
Oil and Middle East diplomacy add pressure
Qatar is mediating between Washington and Tehran on a potential agreement that could include reopening the Strait of Hormuz, which could ease global oil supply flows. President Donald Trump has rejected reports that Washington offered Tehran sanctions relief, while Iran continues to push for conditions tied to unblocking the strait. Although signs have emerged of improving Middle East supplies, oil prices remain elevated, adding upward pressure on inflation and fueling concerns about further central bank tightening.
Source: Investing.com
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