Gold drifts higher as investors weigh Fed rate path

[BENGALURU] Gold prices drifted higher on Thursday (Aug 27) as so-called currency debasement fears lingered, while attention shifted to highly anticipated remarks from US Federal Reserve chair Kevin Warsh this week.

Spot gold was up 0.8 per cent at US$4,630.09 per ounce by 0232 GMT. US gold futures rose 0.7 per cent to US$4,685.50.

The US dollar-debasement narrative, coupled with concerns about the US budget deficit, remains supportive of gold in the medium term, said Kelvin Wong, a senior market analyst at Oanda.

Gold prices rose more than 5 per cent last week after the US Treasury’s move to expand purchases of older long-dated bonds.

This announcement prompted US dollar-debasement fears.

Fed chair Warsh’s remarks at the annual Jackson Hole symposium in Wyoming are expected to be closely watched for further direction.

“The market is awaiting the speech for greater clarity on how the Fed will navigate the current economic landscape. If he does not provide specific forward-looking monetary policy guidance, current market pricing for rate hikes is likely to remain largely unchanged,” Wong added.

Markets are assigning a 36.5 per cent probability to a September US rate hike and a 72.7 per cent chance by December, according to the CME FedWatch tool.

Data on Wednesday showed that annual US inflation unexpectedly held steady in July, well above the Fed’s 2 per cent target for the 65th straight month.

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The pause in the decline from a recent Iran war-induced peak is likely to add to the central bank’s tense debate over whether interest rates should be lifted or held steady.

Gold is considered a hedge against geopolitical and economic risks, but higher interest rates can diminish its appeal as it pays no interest.

On the geopolitical front, Qatar’s prime minister will visit Teheran to relaunch diplomacy after the US and Iran traded recriminations over Washington’s promise to increase economic pressure on Teheran by targeting its trade partners for sanctions.

Spot silver gained 1.7 per cent to US$69.28, platinum rose 1.1 per cent to US$1,848.57 and palladium firmed 0.5 per cent to US$1,334.49. REUTERS