• Gold benefits from a weaker US Dollar, and edges up 0.45%, amid firm US Treasury bond yields.
• Investors eye the upcoming PCE Price Index, the Fed’s preferred inflation measure, which could impact rate cut expectations.
• The US Dollar Index (DXY) falls as the CME FedWatch Tool indicates a 66% chance of a rate cut in September, up from 59.5%.

Gold jumped off last Friday’s low and benefitted from a weaker US Dollar on Monday. On Friday, investors are bracing for the release of the Federal Reserve’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE) Price Index. XAU/USD trades at $2,331, up 0.45%, while the Greenback falls amid firm US Treasury bond yields.

Risk appetite deteriorated; investors seeking safety flock to the golden metal. US Treasury bond yields are flat, as depicted by the 10-year Treasury note standing at 4.253% unchanged.

The US Dollar Index (DXY), which tracks the value of American currency against a basket of six other currencies, fell 0.26% to 105.53.

The US economic docket will feature the Fed’s preferred gauge for inflation, the PCE. If the data aligns with the consensus, this will mean that the disinflation process is evolving as Fed policymakers expect and increase the chances for an interest rate cut as soon as September.

According to the CME FedWatch Tool, traders are pricing in a 66% chance of easing in September, up from 59.5%.

In the meantime, San Francisco Fed President Mary Daly said the labor market is ‘nearing” an inflection point, where further weakening will signify higher unemployment. Daly’s comments signal she’s leaning dovish as she added, “At this point, inflation is not the only risk we face.”

The December 2024 federal funds rate futures contract implies the Fed will ease policy by just 36 basis points (bps) toward the end of the year.