Gold edged lower on Monday (August 25th) as the dollar strengthened, weakening from a two-week high reached in the previous session after comments from US Federal Reserve Chairman Jerome Powell reinforced speculation of an interest rate cut.

Spot gold edged down 0.3% to $3,362.56 an ounce, as of 09:14 GMT, after hitting its highest level since August 11th on Friday. US gold futures for December delivery fell 0.3% to $3,407.30. The dollar index rose 0.2%, making gold more expensive for holders of other currencies.

Powell on Friday hinted at the possibility of a rate cut at next month's Fed meeting, saying that risks to the labor market were increasing but inflation remained a threat, and that the decision was not final. "In my view, Powell only indicated a 25 basis point rate cut for September, so there is some adjustment based on that, which supports the dollar and weighs on gold," said UBS analyst Giovanni Staunovo.

The market is currently pricing in an 87% chance of a quarter-point rate cut at the September policy meeting - compared to nearly 90% after Powell's comments on Friday - and a cumulative 48 basis points of cuts by the end of this year, according to the CME FedWatch Tool.

"A larger cut is contingent on incoming US data, which would need to show a slowdown in economic activity, which we expect. We expect gold to reach USD 3,700/oz by mid-2026," Staunovo added. Investors are awaiting US personal consumption price data on Friday, which is expected to show core inflation creeping up to its highest level since late 2023 at 2.9%.

Gold tends to appreciate in a low-interest rate environment, which reduces the opportunity cost of holding non-yielding bullion. Elsewhere, spot silver fell 0.2% to $38.75 an ounce, platinum fell 0.9% to $1,349.35, and palladium fell 0.7% to $1,118.26.(alg)

Source: Reuters