Gold Nears Record, Fed Cut Bets Grow (15-19 September)

The dollar index hovered near 97.6 but remained under pressure as the latest CPI and jobless claims figures reinforced expectations for Federal Reserve rate cuts. August inflation rose 0.4% MoM, keeping the annual rate steady at 2.9%, while jobless claims surged to 263,000, the highest since 2021. Traders now price in a 93% chance of a 25 bps cut at the Fed’s September 17 meeting.

Gold climbed to $3,650, approaching its all-time high, marking its fourth consecutive weekly gain as soft inflation-adjusted yields and a dovish Fed outlook lifted safe-haven demand. Silver also rose, nearing a 14-year high, while Brent crude advanced to $67 per barrel on renewed supply concerns.

The US 10-year Treasury yield rose modestly to 4.06%, holding just above recent lows, as markets digested mixed economic signals and the prospect of imminent policy easing.

Market Drivers and Catalysts

• Currencies: Dollar softens on mixed CPI and jobless data; euro and pound hold gains; yen slips on policy signals
• Commodities: Gold climbs toward record; silver at 14-year high; oil up on Russian supply concerns
• Fixed Income: US yields steady near 5-month lows; UK gilt yields fall on weak data; ECB leaves rates unchanged
• Macro events: US CPI, Jobless Claims, Job Openings; ECB rate decision; German inflation
• Macro headlines: Dovish Fed expectations mount; ECB adopts cautious tone; Japan PM resignation adds uncertainty

Fixed Income

• US: The 10-year Treasury yield edged up to 4.06%, steadying above 5-month lows, as the market priced in a 25 bps Fed rate cut next week. August CPI rose 0.4% MoM, while jobless claims spiked to a multi-year high, reinforcing dovish bets. PPI unexpectedly declined, underscoring slowing pipeline inflation.
• UK: The 10-year gilt yield fell below 4.6%, its lowest in a month, after GDP stagnated in July and industrial production dropped 0.9%. The data weighed on fiscal sentiment ahead of the Autumn Budget, with speculation of new tax hikes under Chancellor Rachel Reeves adding pressure.
• Japan: The 10-year JGB yield held near 1.59%, as the BoJ’s tightening outlook met with fresh uncertainty following PM Ishiba’s resignation. Political instability and mixed economic figures, such as improving real wages but weak growth, left policy expectations in flux.
• Germany: The 10-year Bund yield hovered around 2.7% after the ECB left rates unchanged and President Lagarde signaled the end of the tightening cycle. Updated ECB projections see Eurozone GDP rising 1.2% in 2025, with inflation forecasts steady near target through 2027.

Commodities

Gold climbed to $3,650, nearing its April record. Bullion extended gains for a fourth straight week, driven by softer US economic data and a weakening dollar. With the Fed expected to ease policy at its September 17 meeting, safe-haven demand strengthened amid concerns over central bank independence and geopolitical tensions.

Silver jumped to nearly $42, marking a 14-year high, supported by industrial demand and favorable macro conditions. Strong demand from solar and EV sectors, along with constrained mining output, underpinned a tightening supply outlook.

Brent crude rose 0.9% on Friday to close the week at $67.00, gaining 2.3% overall. Prices were lifted by supply disruption fears after Russia paused peace talks with Ukraine and drone attacks disrupted operations at Primorsk port. Earlier losses tied to OPEC+ production growth and weaker US demand were reversed.

Currencies

• Dollar: The dollar index remained under pressure near 97.6 as August CPI matched forecasts but jobless claims surged. Markets are pricing in a 93% chance of a 25 bps cut, with some speculation around a larger 50 bps move. Dovish sentiment prevailed despite sticky shelter and food costs.
• Euro: The euro climbed above $1.17, buoyed by dollar weakness and a hawkish ECB stance. Lagarde’s remarks on balanced risks and stabilizing inflation supported the currency. ECB projections kept 2025 inflation at 2.1%, reducing expectations of near-term rate cuts.
• Pound: The pound held around $1.35, little changed week-on-week. While the UK economy stalled in July, fiscal uncertainty and upcoming tax announcements capped upside. Industrial production’s unexpected decline added pressure on UK assets.
• Yen: The yen weakened to 147.4, reversing earlier gains after a US–Japan joint statement called for market-driven exchange rates and discouraged excessive volatility. Japan’s Finance Minister acknowledged the agreement's significance amid tariff talks, but no direct FX levels were discussed.

Macro Calendar Highlights (Times in GMT)

• 12:30 – US Core CPI (Aug)
• 12:30 – US Jobless Claims (Weekly)
• 12:30 – US PPI (MoM)
• 09:00 – Eurozone Interest Rate Decision
• All week – ECB forecasts, BoJ policy speculation, UK fiscal developments