Gold eased slightly on Wednesday but remained close to its highest level in more than three months as investors prepared for a US inflation reading that could decide whether the latest rally has room to run.
Spot gold traded around $4,627 an ounce in later Asian dealings after approaching $4,700 earlier this week, while US futures were near $4,684.
Bullion has gained roughly 15% in August, helped by a softer dollar, renewed demand for hard assets and the Treasury’s decision to expand purchases of longer-dated debt.
The immediate question is whether July PCE inflation gives the Federal Reserve enough comfort to keep interest rates unchanged in September.
PCE becomes the first hurdle for gold
The Personal Consumption Expenditures price index is due at 8:30 am ET on Wednesday.
Economists expect headline inflation to ease to about 3.6% from 3.7% in June, while core PCE is forecast to slow to 3.2% from 3.3%.
Barclays economist Pooja Sriram, cited by Kiplinger, expects core prices to rise 0.2% from June, a result that would suggest inflation is still running too quickly for the Fed to declare victory but may not require an immediate hike.
That distinction matters for gold. A softer reading could pull real yields lower and weaken the dollar, reducing the opportunity cost of holding non-yielding bullion.
A hotter print would revive the opposite trade.
Futures markets currently assign roughly a 62% probability to the Fed leaving rates unchanged in September.
Treasury buybacks keep the fiscal trade alive
Gold’s latest breakout began after the Treasury said it would at least double long-end liquidity-support buybacks from $2 billion to $4 billion per operation starting September 9.
The programme is designed to improve Treasury-market liquidity, but investors also interpreted the move through the lens of rising government debt and pressure on long-term borrowing costs.
ANZ Research analysts, in comments carried by The Wall Street Journal, said markets remain cautious because the interaction between Treasury debt management and monetary policy has become harder to read.
That uncertainty has helped keep demand for gold elevated even as Treasury yields remain relatively high.
The dollar index was hovering near 98.9 on Wednesday, close to multi-month lows, adding another source of support for internationally traded bullion.
Warsh could decide whether $5,000 returns to view
Attention will shift next to Fed Chair Kevin Warsh, who is scheduled to deliver keynote remarks at Jackson Hole at 10 am ET on Friday.
His first major symposium address comes as investors debate whether inflation remains the Fed’s dominant concern or whether weaker employment data and tighter financial conditions justify patience.
Wells Fargo Investment Institute’s Mason Mendez told MarketWatch that resilient global demand, renewed central-bank purchases and geopolitical uncertainty continue to support gold.
The firm maintains a 2026 target of $4,900 to $5,100, although it expects monetary-policy headwinds to make the path higher uneven.
Oil’s recent decline may also help. Brent has fallen sharply on hopes of progress over the Strait of Hormuz, easing one source of inflation pressure.
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