Gold took advantage of dollar weakness las week, but in a daily slump

Gold futures staged weekly gains driven by US dollar weakness which was pushed down by the reinforced forecasts of more aggressive rate cut by the Fed throughout last week. The forecasts was supported by Federal Reserves board members’ statements an economic data. ?

Gold future finished last week trading higher at $ 22658 per ounce compared to the previous week’s close of $ 2622 per ounce. The precious metal reached a low of $2613 during the week’s trading, compared to a high of $2685.

This was because key economic indicators – GDP and Personal Consumption Expenditure (PCE) – painted a positive picture of the US economy. These data points suggested that the Fed may maintain its current trajectory of easing monetary policy, a move that typically benefits risk assets like stocks and commodities.

The US economy maintained a steady growth pace in the second quarter of 2024, with real Gross Domestic Product (GDP) expanding at an annual rate of 3.0%, according to the final estimate released last Thursday.

?In the first quarter, GDP increased 1.6 percent (revised). The second-quarter increase in real GDP was the same as previously estimated in the "second" estimate released in August.

Inflation in the United States continued to show signs of moderation in August. The Personal Consumption Expenditures (PCE) price index, a key measure of inflation, increased by only 0.1% compared to the previous month. This marks a slowdown from the 0.2% gain recorded in July.

On annual basis, PCE eased to 2.2%, down from 2.5% in July, according to the annua reading. This suggests that inflationary pressures are gradually easing in the US economy.

On monetary policy front, Federal Reserve Bank of Chicago President Austan Goolsbee indicated last Monday that he anticipates multiple interest rate cuts over the coming year. This stance aligns with the Fed’s goal of achieving a "soft landing" for the US economy, which involves curbing inflation without causing significant job losses or economic contraction.

Goolsbee also noted that inflation has significantly declined from its peak and has recently been converging with the Federal Reserve's target of 2%. This positive development is a key factor influencing the central bank's decision to ease monetary policy.

He added: "Basically, we would love to freeze both sides of the Fed’s dual mandate right here," Goolsbee said. "Yet rates are the highest they’ve been in decades. It makes sense to hold rates like this when you want to cool the economy, not when you want things to stay where they are".

But on daily basis, gold futures slumped to lower levels after the US dollar staged a recovery on hawkish statements by Fed’s Bowman who stressed that US core inflation is "uncomfortably" above the Fed's 2% target. Positive US date pushed the greenback higher too.

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