Gold prices retreated on Friday but are set for a third straight quarterly gain as investors await U.S. inflation data due later in the day for more clarity on the Federal Reserve’s interest rate cutting timeline.
Spot gold was down 0.3% at $2,321.18 an ounce, as of 0354 GMT. Prices gained about 4% for the quarter.
U.S. gold futures were down 0.2% at $2,331.90.
“Gold is up for the quarter, largely because the scope for monetary easing in the US has increased… China has also been buying large amounts of gold for its reserves, which helped support the market in the second quarter,” said Ilya Spivak, head of global macro at Tastylive.
After increasing its gold reserves for 18 consecutive months, official data from the People’s Bank of China (PBOC) showed its holdings remained stable in May. However, a survey by the World Gold Council found that more central banks could increase their gold reserves in the coming 12 months.
Gold rose more than 1% in the previous session after data showed a continued, albeit moderate, slowdown in economic activity in the United States. Currently, according to the CME’s FedWatch tool, the market sees a 64% chance that the Fed will cut interest rates for the first time in September.
However, Fed Governor Michelle Bowman reiterated on Thursday that she was not yet ready to support a rate cut by the central bank, with inflationary pressures still high.
The U.S. personal consumption expenditure (PCE) price index – the Federal Reserve’s preferred measure of inflation – is due at 1230 GMT.
A soft set of (PCE) numbers is needed to keep Fed easing hopes alive and further support gold, City Index senior analyst Matt Simpson said.
While bullion is seen as a hedge against inflation, higher rates increase the opportunity cost of holding the non-yielding asset.
Spot silver was flat at $29.07, while platinum gained 1.1% to $998.15. Both metals posted quarterly gains.
Spot palladium rose 1.6% to $944.40.
