Key Highlights
- The yellow metal recovered 0.8% to approximately $4,351 following Thursday’s nearly 2% decline
- Traders are now assigning approximately 70% probability to a Federal Reserve interest rate increase next week
- August producer price data showed a 0.4% monthly increase, intensifying inflation worries
- Physically-backed gold ETFs recorded $18 billion in net inflows during August, marking the second-highest monthly total ever
- The red metal retreated from its record peak above $14,800 per metric ton
The precious metal staged a recovery on Friday following Thursday’s steep decline, though it remains positioned for a third consecutive weekly retreat as inflation figures and monetary policy expectations maintain downward pressure.
Spot gold advanced 0.8% to reach $4,351.28 per ounce during morning trade. Gold futures declined 0.4% to settle at $4,391.37. Silver climbed 0.8% to $64.10 per ounce, while platinum advanced 1.1% to $1,801.18.
The yellow metal is poised to decline over 2% across the week. Primary factors include advancing crude oil prices, elevated Treasury yields, and increasing speculation that the Federal Reserve will implement a rate increase during next week’s policy gathering.
August producer price data revealed a 0.4% monthly gain, aligning with analyst forecasts and representing the most significant monthly advance since May. The figures intensified concerns that energy expenses are driving inflation upward.
Traders are currently assigning roughly 70% odds to a Fed rate increase this week, based on CME FedWatch tool projections.
Regional Tensions Drive Energy Prices Upward
Crude oil currently plays a significant role in the inflation narrative. Brent crude advanced near $108 per barrel as confrontations between the United States and Iran continued to intensify.
Hostilities have escalated in recent weeks. American forces have targeted Iranian oil vessels, Iran has fired missiles toward a Jordanian military installation, and Houthi forces in Yemen have launched attacks on Saudi facilities.
Ongoing interruptions to petroleum supplies may sustain elevated inflation levels, providing the Federal Reserve with additional justification to maintain restrictive monetary policy.
Market participants now await Friday’s consumer price index data. Forecasters anticipate headline CPI will advance 0.4% monthly and 3.4% annually for August. Core CPI is projected to increase 0.2% from July levels.
Exchange-Traded Funds Reach Historic Accumulation Levels
Notwithstanding near-term price headwinds, investor appetite for gold continues robustly. The World Gold Council disclosed that global physically-backed gold ETFs attracted $18 billion during August, representing the second-largest monthly accumulation recorded.
Total holdings increased by 121 tonnes to reach an unprecedented 4,189 tonnes. Assets under management surged 16% to $615 billion.
This demand contributed to gold’s 13% August gain, marking its third-strongest monthly performance across 25 years.
Nevertheless, market observers suggest gold must recapture its 200-day moving average near $4,537 to indicate the correction has concluded. Before that occurs, some forecasters anticipate prices potentially declining toward $4,200.
Copper experienced notable volatility this week as well. Three-month contracts on the London Metal Exchange reached an unprecedented level above $14,800 per metric ton before retreating. Futures last traded up 0.3% at $14,233 per ton.
Sucden Financial analysts noted that speculation surrounding potential U.S. tariff rollbacks triggered rapid position unwinding in copper markets, though constrained supply conditions should prevent substantial further declines.
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