(Bloomberg) — Gold edged higher as investors awaited a US inflation report that will shed light on the path for interest rates, while also assessing continued threats to the Federal Reserve’s independence.
Friday’s US personal consumption report — the Fed’s preferred inflation gauge — is expected to accelerate at the fastest annual pace in five months, which could limit the central bank’s ability to ease policy. Just 24 hours ahead of the release, data showed the US economy expanded faster than initially estimated.
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Swaps markets still show a more than 80% chance of a rate cut next month, with traders increasing bets on a September move after Fed Chair Jerome Powell last week opened the door to a reduction. Still, he also emphasized a high degree of uncertainty over how inflation and the US labor market would evolve as the impact of President Donald Trump’s tariffs feed through. Lower borrowing costs tend to benefit gold, as it doesn’t pay interest.
Meanwhile, Fed Governor Lisa Cook sued President Donald Trump over his attempt to fire her for alleged mortgage fraud, kicking off a historic fight over independence of the US central bank.
Trump’s claim that Cook may have lied on mortgage applications to get better loan terms on a pair of homes is not sufficient “cause” to fire her because the alleged conduct is unproven and took place before her Senate confirmation, Cook said in a lawsuit Thursday.
If Trump is successful in removing Cook, it would give him an opportunity to secure a four-person majority on the Fed’s seven-member board. The president has repeatedly criticized Powell and his colleagues for not cutting rates this year, and the market is worried that a less independent monetary authority could erode investor confidence in the US and lead to faster inflation. Such a scenario would likely bolster gold’s allure as a haven.
The precious metal has been largely range-bound since hitting a record above $3,500 an ounce in April, with the market looking for fresh catalysts. Trade and geopolitical frictions, inflows to exchange-traded funds and central bank moves to diversify away from the US dollar have supported prices.
Gold was up 0.6% at $3,416.85 an ounce by 12:31 p.m. in New York. The Bloomberg Dollar Spot Index declined 0.3%. Silver, platinum and palladium all advanced.