Gold continues to be supported by upcoming rate cuts by the Fed

Gold pricing remains supported above $2500 per ounce. Propped up by central banks continuing to add the precious yellow metal to their balance sheets. In addition, there has been a surge of safe-haven demand the result of concern over geopolitical hot spots, and a steady retail demand. Combined these factors have created strong price support near gold's highest value in history.

As of 6:00 PM EDT, gold futures basis the most active December contract is fixed at $2535.50 after factoring in today’s net gain of $8.70, or 0.34%. Today’s moderate gains have occurred despite dollar strength. The dollar is currently up 0.44% fixing the index at 101.651. 

Today’s gains followed Friday’s $20 decline after the US Labor Department’s jobs report came in under expectations. While economists had predicted an addition of 160,000 new jobs in August, the actual figure came in at 142,000. This coupled with downward revisions to both the June and July jobs report suggests that labor force has been weakening for some time. This may have significant implications for monetary policy decisions.

According to the CME’s FedWatch tool, the probability that the Federal Reserve will cut rates by 50 basis points at its September 18 FOMC meeting has remained at 30% over the last week. Regardless of the size of the rate cut by the Federal Reserve next week, the monetary path of the central bank preparing to pivot from its former restrictive monetary policy to an accommodating one. 

This will be accomplished by multiple rates cuts this year. Currently, economists are anticipating that the Fed will cut rates by 1% to 1 ¼% over the remaining open market committee meetings this year.

Market participants will focus on the August consumer price index on report due on Wednesday and the producer price index data on Thursday hoping to gain insight and further clues on the Fed's pathway to monetary policy easing.

Besides Chairman Powell, other Federal Reserve officials have signaled an upcoming pivot by the Federal Reserve. John Williams, President of the Federal Reserve Bank of New York said that it is now appropriate for the US central bank to lower interest rates, citing progress on inflation and a cooling labor market.

According to analysts at ING, “The precious metal's upward rally is just getting started, with the most anticipated U.S. interest rate cut in decades set to bring fresh impetus to gold prices in September.”

Our current projections anticipate gold to continue to gain value with a $2700 per ounce price target by the first quarter of next year.

Wishing you as always good trading,