Gold Clings to Gains as Cooling US Inflation Boosts Fed Pause Bets

GOLD - NEW YORK. Gold held on to gains on Thursday after cooler U.S. inflation and weaker jobs numbers reinforced expectations that the Federal Reserve will keep interest rates on hold this year.

Spot gold was steady at $1,942.84 per ounce by 10:17 a.m. EDT (1417 GMT), close to its highest since Aug. 2, at $1,948.79, hit on Wednesday.

U.S. gold futures fell 0.2% to $1,969.60.

Inflation as measured by the personal consumption expenditures (PCE) price index rose 0.2% last month, matching June's gain. In the 12 months through July, the PCE price index increased 3.3%, after advancing 3.0% in June.

U.S. consumer spending, which accounts for more than two-thirds of the country's economic activity, accelerated in July.

Weekly initial jobless claims fell 4,000 to 228,000. That compares with a four week average of 237,500.

Read Also: US Consumer Spending Accelerates; Monthly Inflation Rates Cooling

Bob Haberkorn, senior market strategist at RJO Futures said that while the numbers were "not terrible", they were "not great" either and may mean that the U.S. Federal Reserve would be in a position to halt interest rate rises early next year.

Gold is now in wait-and-watch mode, and a drop in bond yields could prompt some strength in bullion, Haberkorn added.

U.S. Treasury yields were little changed to slightly lower, while the dollar briefly trimmed gains, before rising again, after the economic data.

Bets on the Fed leaving rates unchanged in September stood at 88.5%, while bets of a pause in November were at 56%, according to the CME Group's FedWatch tool.

Silver eased 0.5% to $24.52 per ounce, having climbed to a more than one-month high on Wednesday.

Platinum rose 0.3% to $976.39 as it heads for its second consecutive monthly gain. Palladium climbed 0.3% to $1,226.12, but was set for a 4% monthly fall.