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Investing.com-- Gold prices steadied near a two-week high in Asian trade on Thursday, remaining largely underpinned by bets on a September interest rate cut by the Federal Reserve amid an ongoing feud between President Donald Trump and the central bank.
Spot prices came close to rising back above $3,400 an ounce this week, but stopped just shy of the level as the dollar caught some bids and Treasury yields stabilized.
Heightened uncertainty over the Fed’s independence was a major driver of gold this week, after Trump attempted to fire Governor Lisa Cook. Cook and the Fed questioned Trump’s authority over the attempted firing, with the Fed governor also flagging legal action to retain her role.
Spot gold fell 0.2% to $3,389.96/oz, while gold futures for October rose 0.4% to $3,445.32/oz by 01:37 ET (05:37 GMT).
Fed Sept. rate cut bets rise amid Trump feud
Gold’s gains this week came amid increasing concerns over the Fed’s independence, following Trump’s move to fire Cook. The attempted firing sets the Fed and Washington up for a protracted legal battle, during which Cook is expected to maintain her post.
But this still saw markets increase their bets on a September rate cut by the central bank, especially after Chair Jerome Powell signaled last week that such a move was possible. Fed fund futures showed markets pricing in a 84.9% chance for a 25 basis point cut in September, up from 78.4% seen a week ago, CME Fedwatch showed.
Powell noted some cooling in the labor market, but still remained largely non-committal towards future rate cuts, citing uncertainty over the inflationary impact of Trump’s policies.
The dollar retreated this week on bets of a September cut, benefiting gold and broader metal prices. While the greenback did curb some of its losses, most commodity prices remained upbeat.
Spot platinum steadied at $1,349.08/oz, while spot silver rose 0.3% to $38.6975/oz.
Among industrial metals, benchmark copper futures on the London Metal Exchange rose 0.3% to $9,789.60 a ton, while COMEX copper futures fell 0.2% to $4.4915 a pound.
Lower rates typically benefit metal prices by lowering the opportunity cost of investing in non-yielding assets.
US GDP, PCE inflation data on tap
Markets were now awaiting more cues on the U.S. economy from a host of readings in the coming days.
A revised reading on second-quarter gross domestic product output is due later on Thursday, and is expected to show growth remaining strong at 3% quarter-on-quarter.
More closely watched will be PCE price index data for July, which is due on Friday. The print is the Fed’s preferred inflation gauge, and is expected to show inflation remaining steady and above the central bank’s 2% annual target.