Gold Hits Week High, Despite Crash and Burn for September and Q3

By Barani Krishnan

Investing.com -- Gold prices perked up for a fourth day in a row, hitting a one-week high after a largely miserable September for longs in the game.

For the month though, bullion was down 3%, while for the quarter, it tumbled 7.5% for its worst quarter since March 2021.

Gold’s benchmark futures contract on New York’s Comex, December, settled Friday’s trade up $3.40, or 0.2%, at $1,672 per ounce.

The spot price of bullion, which is more closely followed than futures by some traders, was up just $1.25, or 0.1%, at $1,661.86 by 15:12 ET (19:12 GMT).

Gold’s four-day rebound reached a climax Friday when the spot price hit a one-week high of $1,675.35 after data showing another surprisingly higher U.S. inflation print for August that reinforced expectations for more super-sized Federal Reserve rate hikes. Gold is often seen as a store of value and a hedge against inflation and Fed rate increases.

“Inflation expectations matter and … things are starting to look better for gold,” said Ed Moya, analyst at online trading platform OANDA.

Risk assets came under pressure on Friday after latest data showed the Fed’s preferred inflation indicator, the Personal Consumption Expenditures Index, grew 6.2% during the year to August, versus 6.3% in the 12 months to July.

Economists polled by U.S. media had expected the so-called PCE Index to expand by just 6% during the year to August.

On a monthly basis, the PCE Index actually grew more in August than in July, rising 0.3% from a previous decline of 0.1%. Economists had expected a monthly growth of just 0.2% in August.

The readings showed the Fed’s battle against inflation had barely eased despite sharp drops in gasoline prices over the past three months. The Fed has warned of late that it will not let up on rate hikes it had embarked on since March to fight inflation.

U.S. inflation remains “very high” and could continue to shock as the Federal Reserve works on subduing the worst price pressures in four decades for Americans, Fed Vice Chair Lael Brainard said Friday. "Monetary policy will need to be restrictive for some time to have confidence that inflation is moving back to target," Brainard added.

To fight inflation, the Fed has raised interest rates by 300 points this year, from an original base of just 25 points in February. The central bank’s chairman Jerome Powell said last week that U.S. rate hikes will have some way to go before the Fed considers a pause or reduction, with the likelihood of another 125 basis points being added before the end of the year.

Despite Moya’s optimism about gold going into October, some analysts were less impressed with bullion’s outlook.

“Despite the price recently hitting a two-year high, it has been an inferior hedge, and the opportunity costs have been high,” Reuters’ BreakingViews analyst Robert Cyran said in a commentary on gold Friday. “An investment 10 years ago in the S&P 500 Index would have tripled.”