Gold surges over 1% on US inflation data

Today’s headlines

What’s happening: Gold prices surged more than 1% on Friday, as investors assessed the latest inflation data from the US.

What happened: The US inflation report reinforced speculations of the Federal Reserve slashing interest rates this month.

Weakness in the US dollar also helped gold deliver its strongest monthly performance in four months.

Why it matters: Data released on Friday showed that US consumer spending rose sharply and underlying inflation accelerated in July, as higher tariffs raised prices of some products.

Personal spending rose by 0.5% to $20.802 trillion in July, accelerating from 0.4% in June. The Personal Consumption Expenditures Price index climbed 0.2% in July, following a 0.3% rise in the previous month. The figure came in-line with market estimates. On an annual basis, the headline PCE inflation came in unchanged at 2.6%, meeting market expectations.

The University of Michigan’s year-ahead inflation expectations for the US came in at 4.8% for August, below the preliminary reading of 4.9%.

Investors raised their speculations of an interest rate cut at the Fed’s September policy meeting. Markets widely expect the central bank to cut rates by 25 basis points. Non-yielding gold generally moves higher in a low-rate environment.

Weakness in the US dollar lent support to the yellow metal last month, as a softer greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 2% in August.

US gold for December delivery jumped 1.2% to close at $3,516.1 an ounce on Friday.

In other metals trading, silver climbed to $40.723 per ounce and platinum rose to $1,370.5, with both metals recording gains last month. Palladium settled at $1,124.00, logging a monthly loss.

What to watch: Investors will continue monitoring tariff-related announcements from the US, which are expected to impact overall inflation and provide direction to gold prices ahead.

Data on ISM manufacturing PMI and construction spending from the US, due to be released on Tuesday, will also remain in focus. The ISM manufacturing PMI, which declined to 48 in July from 49 in the previous month, is expected to rise to 48.6 in August. Construction spending in the US, which declined by 0.4% to an annualised rate of $2.136 trillion in June, is projected to climb by 0.2% in July.

The markets today

The Australian dollar in focus today ahead of some major economic reports

Context: The AUD/USD forex pair edged higher this morning as investors digested the latest economic data.

Details: Data released this morning showed the S&P Global manufacturing PMI rose to 53 in August, from 51.3 in the previous month, signalling the fastest growth since September 2022. Business inventories in Australia rose by 0.1% in the second quarter, following a 1.2% gain in the previous quarter.

Private house approvals rose by 1.1% to 9,288 units in July, compared to a 1.9% decline in June, while building permits dipped by 8.2% to 15,769 units in July, following a 12.2% gain in the previous month. The figure was worse than market estimates of a 4.8% decline.

Corporate profits in Australia surprisingly declined by 2.4% in the second quarter, missing market expectations of a 1.2% rise.

Weakness in the US dollar lent some support to the AUD/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped to 97.74.

The AUD/USD pair edged higher to 0.6545 this morning, while the S&P/ASX 200 fell 0.72% to 8,908.90.

What to watch: Investors await the release of data on TD-MI inflation gauge (0500 UAE Time), current account (0530 UAE Time) and net exports contribution to GDP (0530 UAE Time) from Australia on Tuesday. Australia’s monthly inflation gauge by the Melbourne Institute, which climbed 0.9% in July, is expected to rise by 0.2% in August. Analysts expect Australia’s current account deficit to widen to A$16 billion in the second quarter, from A$14.7 billion in the previous quarter.

Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.20%, 0.64% and 1.22%, respectively.

The news shaping the markets

Ukraine is look to conduct deep strikes into Russia following a massive drone attack by Russia, President Volodymyr Zelenskyy said. The news sent the RUB/USD pair lower in forex trading this morning.

Philippines’ S&P Global manufacturing PMI slipped to 50.8 in August, from 50.9 in the previous month, exerting pressure on the PHP/USD forex pair.

South Korea’s S&P Global manufacturing PMI rose to 48.3 in August, from 48 in the previous month. The latest reading signalling deteriorating business conditions for the seventh straight month sent the KRW/USD pair lower in forex trading this morning.

Taiwan’s S&P Global manufacturing PMI rose to 47.4 in August, from 46.2 in July. However, the region’s manufacturing activity remaining in the contraction zone exerted pressure on the TWD/USD forex pair.

Japan’s S&P Global manufacturing PMI was revised downward to 49.7 in August, from a preliminary reading of 49.9, sending the JPY/USD pair lower in forex trading this morning.

What else to watch today

Eurozone’s HCOB manufacturing PMI (1200 UAE Time) and unemployment rate (1300 UAE Time), Italy’s unemployment rate (1200 UAE Time), UK’s mortgage approvals (1230 UAE Time), mortgage lending (1230 UAE Time), M4 money supply (1230 UAE Time), net lending to individuals (1230 UAE Time), S&P Global manufacturing PMI (1230 UAE Time) and Bank of England’s consumer credit (1230 UAE Time), South Africa’s ABSA manufacturing PMI (1300 UAE Time), Mexico’s business confidence (1600 UAE Time) and S&P Global manufacturing PMI (1900 UAE Time), Brazil’s S&P Global manufacturing PMI (1700 UAE Time), as well as France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time).