Gold prices fell slightly on Friday, but were sitting on strong gains in August amid increasing bets on a September interest rate cut by the Federal Reserve.

Focus was now squarely on upcoming PCE price index data, the Fed’s preferred inflation gauge, for more cues on interest rates. 

The dollar retreated in anticipation of the PCE data, and was also set for August losses amid growing bets on a September rate cut. This trend benefited gold and broader metal prices.

Spot gold fell 0.2% to $3,409.89 an ounce, while gold futures for October fell 0.1% to $3,469.92/oz by 01:48 (05:48 GMT). 

Gold set for August gains as rate cut bets grow

Spot gold was trading up 3.7% in August, and was now less than $100 away from its April record high.

Gains in the yellow metal were fueled chiefly by increased bets on a September rate cut by the Fed, especially as data pointed to a cooling in the U.S. labor market.

Fed Chair Jerome Powell acknowledged that the labor market was cooling and flagged the possibility of a 25 basis point cut in September. But Powell still remained largely non-committal towards future easing, citing inflationary risks from U.S. President Donald Trump’s trade tariffs. 

Still, markets ramped up bets on a September cut, with CME Fedwatch indicating an 82.9% chance the Fed will cut rates by 25 bps next month. 

This notion weighed on the dollar and benefited broader metal prices, most of which were set for monthly gains. The dollar index was trading down nearly 2% for August. 

Platinum and silver were trading up 5% and 5.9%, respectively, for the month. The two outpaced gold as investors bought into relatively discounted prices for the two metals. 

Benchmark copper futures on the London Metal Exchange rose 0.6% to $9,889.50 a ton on Friday, while COMEX copper futures rose 0.6% to $4.5730 a pound. Both contracts were trading up between 2.7% and 4.5% for August. 

PCE inflation awaited for more rate cues 

Market focus was now squarely on upcoming PCE price index data, due later on Friday, for more cues on the U.S. economy and interest rates.

The print– especially core PCE data– is the Fed’s preferred inflation gauge, and is likely to factor into the central bank’s plans for rate cuts.

While headline PCE inflation is expected to remain largely steady, core PCE inflation is expected to have increased slightly in July, while also remaining well above the Fed’s 2% annual target.

Any signs of sticky inflation are likely to cast doubts over the Fed’s rate cut plans, especially given that the Fed has cited inflation as its biggest consideration for rates. 

August’s inflation data is expected to provide more insight into the inflationary impact of Trump’s tariffs, given that a bulk of the levies took effect during this month.