By: Economy Middle East

Gold prices edged lower on Wednesday after reaching a more than three-month high in the previous session, as investors awaited key U.S. inflation data for clues on the Federal Reserve’s interest-rate trajectory.

As of 4:55 GMT, spot gold fell 0.40 percent to $4,640.15 an ounce. Prices had climbed to their highest level since mid-May on Tuesday, extending gains from last week following the U.S. Treasury’s announcement of larger bond buybacks. Meanwhile, U.S. gold futures edged up 0.05 percent to $4,696.94.

In the UAE, gold rates edged AED0.75 lower, with 24-carat gold easing to AED559.25 and 22-carat gold falling to AED517.75.

In addition, 21-carat gold edged lower to AED496.5 and 18-carat gold declined to AED425.5.

Meanwhile, 14-carat gold eased AED0.5 to AED332.

Investors eye PCE data and Warsh’s Jackson Hole address

The Federal Reserve’s preferred inflation measure, the U.S. Personal Consumption Expenditures (PCE) price index for July, is due at 12:30 GMT. Investors are also looking forward to Fed Chair Kevin Warsh’s address on Friday at the central bank’s Jackson Hole symposium.

“Gold is holding steady at around $4,643 after four consecutive days of rallies. Last week alone saw the precious metal gaining 7 percent after the U.S. Treasury signaled it would ramp up the buybacks of long-dated bonds to at least $14 billion in additional purchases between September 9 and November 4, which in turn pressured the U.S. dollar. Thus, it is only natural for gold to consolidate after three back-to-back weekly gains,” said Vijay Valecha, Chief Investment Officer, Century Financial.

Earlier this month, data showed an unexpected drop in U.S. nonfarm payrolls, while consumer inflation came in line with expectations, reducing bets for a September rate hike.

According to the CME FedWatch Tool, traders are currently pricing in a 61.6 percent probability that the Fed will keep interest rates unchanged next month.

“All attention is on the Jackson Hole Symposium, where Fed Chair Kevin Warsh is slated to speak on Friday and potentially offer clues about the central bank’s stance on inflation,” said Valecha.

Gold’s appeal improves as economic tensions grow

On the geopolitical front, Iran said it had resumed talks with neighboring Oman on managing the Strait of Hormuz, helping push oil prices lower.

International Monetary Fund Managing Director Kristalina Georgieva said the global economy has absorbed the energy shock from the Iran war better than initially feared. However, she warned of worsening fiscal conditions in some countries.

“Meanwhile, the U.S. has threatened economic measures against Iran, also warning of economic consequences for countries that continue to do business with Tehran. At the same time, trade tensions with Canada are escalating after negotiations broke down last week, raising the prospect of a broader trade dispute between the two economies. These factors have also increased the appeal of adding gold to portfolios,” said Valecha.

“On the technical front, gold faces an immediate hurdle at $4,651. A sustained break above this level could potentially fuel a move up toward $4,700 and $4,765, while support sits around $4,560,” he added.

Other precious metals

As gold prices eased, the broader precious metals market maintained its strength. Spot silver rose 0.9 percent to $69.26 an ounce, platinum gained 0.4 percent to $1,865.09, and palladium advanced 1.3 percent to $1,343.75.