Gold rises higher: Is a $3,400 breakout next as dollar stumbles?

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Gold extended gains to a third straight session on Thursday, supported by rising expectations of an interest rate cut by the US Federal Reserve in September following tame inflation data, which also weighed on the dollar.

Spot gold rose 0.4 per cent to $3,367.53 per ounce as of 0156 GMT. US gold futures for December delivery added 0.3 per cent to $3,416.70.

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“Markets are pricing in the chance that the Fed cuts 50 basis points in September. So the dollar’s weakening, gold’s going up as a result, yields are also down,” said Kyle Rodda, Capital.com’s financial market analyst.

“The technical setup of gold looks really constructive. The trend still looks higher. We just basically need to see the market break through $3,400 level on a sustained basis.”

The dollar languished near multi-week lows against its rivals, making gold less expensive for holders of other currencies. Benchmark US 10-year Treasury yields held near a one-week low.

US consumer prices rose only marginally in July, strengthening expectations of a Fed rate cut next month, with Treasury Secretary Scott Bessent noting there is a good chance the central bank will opt for a 50 bps reduction.

Traders now see a cut on September 17 as a near certainty, according to data compiled by LSEG, and even lay around 6 per cent odds on a super-sized half-point trim.

Non-yielding gold thrives in a low-interest-rate environment.

Investors are awaiting the US economic data due later this week, including the US Producer Price Index, weekly jobless claims and retail sales data for clues into the Fed’s rate path.