Gold Futures Rise on Dollar Weakness and Rate Cut Hopes

Gold futures climbed higher on Thursday as investors reacted to a weaker U.S. dollar, safe-haven demand, and growing expectations of a U.S. interest rate cut in September. The rise in gold futures signals renewed market confidence in bullion as an attractive asset when monetary policy loosens and uncertainty in financial markets lingers.

Gains Driven by Dollar Weakness

Gold futures rose 0.4% to $3,461.10 a troy ounce by late morning in Europe. Analysts attributed the move to the U.S. dollar’s decline, which makes commodities priced in dollars cheaper for international buyers. The weaker currency improved demand for bullion, traditionally seen as a hedge against currency volatility.

Traders noted that gold’s movement has closely mirrored shifts in the dollar index. As the dollar fell, gold became more appealing to foreign investors seeking both safety and value preservation.

Rate Cut Expectations Build

Markets now price in an 88% probability that the Federal Reserve will cut interest rates by 25 basis points in September. The expectation of looser monetary policy is a significant driver of gold demand. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, making bullion more competitive against interest-bearing investments such as bonds.

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Analysts from SP Angel highlighted that expectations of a rate cut have strengthened the appeal of gold. They also noted that investors are waiting for upcoming U.S. economic data, which will guide the Fed’s decision.

Spotlight on Economic Data

The release of the U.S. Personal Consumption Expenditure (PCE) data on Friday will play a crucial role in shaping investor sentiment. The PCE index is the Fed’s preferred measure of inflation. Traders will closely monitor the data to see how inflation trends align with rising unemployment concerns.

If inflation continues to ease while labor market conditions weaken, pressure will mount on the Fed to prioritize growth over price stability. This could further reinforce expectations of rate cuts, giving another boost to gold futures.

Political Pressures on the Fed

Investor attention has also turned to the Federal Reserve’s independence. Tensions grew after President Donald Trump moved to oust Fed Governor Lisa Cook. The decision sparked concerns about political influence over monetary policy.

Although U.S. Treasuries have seen steady gains, reflecting some investor confidence in bond markets, gold’s climb indicates persistent caution. Safe-haven demand has picked up as traders hedge against the possibility of greater political interference in central banking decisions.

Safe-Haven Appeal Strengthens

Beyond rate expectations, gold’s traditional role as a safe-haven asset has once again come into focus. With uncertainties ranging from U.S. politics to global economic headwinds, investors are turning to bullion as a protective measure.

Analysts stressed that during periods of instability, gold often outperforms as traders shift away from riskier assets. The current mix of a weaker dollar, looming rate cuts, and political noise has created ideal conditions for gold to rally.

Base Metals Also Gain

The rally was not limited to gold. Base metals also saw gains in thin trading. Copper rose 0.2% to $9,796.50 per metric ton on the London Metal Exchange, while aluminum climbed 0.2% to $2,608.50 per ton.

These moves also reflected the impact of the weaker U.S. dollar, which reduces costs for overseas buyers of dollar-denominated commodities. However, analysts pointed out that copper volumes remained muted.

Copper Market Faces Rangebound Trend

Neil Welsh of Britannia Global Markets noted that copper prices remain broadly rangebound. Despite the slight uptick, demand from China—the world’s largest consumer of copper—continues to show weakness. Industrial activity has slowed, and global growth sentiment remains cautious.

While supply-side concerns have eased due to improved output from major producers, demand has yet to pick up strongly. As a result, copper’s upside potential remains limited in the near term.

Aluminum Supported by Supply Constraints

Aluminum markets present a slightly different picture. Analysts pointed out that supply constraints could provide a floor for prices. China, the world’s top producer, has capped national aluminum smelting capacity at 45 million metric tons per year.

This policy aims to reduce power consumption and curb emissions, aligning with Beijing’s broader climate and energy goals. Major aluminum producers expect that the cap will tighten supplies, potentially lifting prices in the medium term even if demand remains steady.

Broader Market Sentiment

Overall, commodity markets are being shaped by a combination of weaker currency trends, monetary policy expectations, and shifting supply-demand dynamics. Gold continues to attract the most attention due to its safe-haven appeal and sensitivity to interest rate moves.

Base metals, while benefiting from dollar weakness, remain more dependent on industrial demand, especially from China. Analysts argue that any rebound in Chinese construction and manufacturing could quickly change the outlook for copper and aluminum.

Outlook Ahead

Investors will continue to watch Friday’s U.S. PCE data as the next major trigger for gold and broader commodity markets. If inflation falls while unemployment pressures rise, gold futures could rally further on stronger rate-cut bets.

Meanwhile, political developments in Washington will remain in the background, influencing safe-haven flows. With the Federal Reserve under heightened scrutiny, traders will likely keep one foot in gold regardless of how data plays out.