The start of the week saw the price of gold surge after economic data released last week boosted expectations of the Federal Reserve reducing rates of interest. U.S. gold futures saw their price hit $3426.40 per ounce, representing a 0.8% increase. Spot gold also saw its price surge to $3372.15 an ounce, a 0.3% increase.
RJO Futures’ senior market strategist Daniel Pavilonis stated that the probability of the Fed reducing rates in September was strong now.
He explained that the odds for the Fed doing the same in December were even stronger, adding that this, combined with inflationary pressures, made gold’s outlook appear quite bullish. Gold, which is often used as a hedge against inflation, is known to perform well in an environment with low rates of interest.
Economic data released last week demonstrated weaker than expected growth in employment in the U.S. for the month of July. The count for nonfarm payrolls for the previous 2 months was also lowered by a whopping 258,000 jobs, which suggests a steep decline in employment conditions.
PCE inflation data also rose by 0.3% in June following an upwardly adjusted 0.2% increase in May as tariffs began to drive up the prices of certain goods.
Based on the CME FedWatch tool, market participants now assign an 87.8% probability to a rate cut in September, quite an increase from the 63% recorded a week earlier. This comes as U.S. President Donald Trump continues to impose tariffs on various goods as well as countries. According to a presidential executive order, Trump imposed a 50% tariff on various goods from Brazil, 39% for Switzerland, 35% for Canada, 20% for Taiwan, and 25% for India.
In total, sixty-nine trading partners were impacted, some of whom had already secured agreements to lower tariffs whereas others had no possibility to discuss terms. Jamieson Greer, America’s Trade Representative, noted that the tariffs imposed by the president would likely hold steady rather than be decreased as part of ongoing negotiations.
In other news, spot silver also saw its price rise to $37.35 an ounce, representing a 0.9% increase. Platinum also recorded a 1.3% increase in its price, bringing it to $1332.20. Palladium’s price dipped though, falling to $1188.90 an ounce.
Despite the 1.6% drop, Pavilonis believes that there’s a possibility that the price of palladium may increase, with strong buying interest nearing $1180, with a possible surge catapulting the metal’s price above $1230.
Extractive industry participants like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) will be following the trajectory of the price of these metals in order to glean what the future could hold for their investments.
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