Gold prices surged more than 1% on Thursday, reaching a record high as expectations for an interest rate cut by the U.S. Federal Reserve next week strengthened following data suggesting a slowing U.S. economy. Spot gold climbed 1.6% to $2,552.63 per ounce by 11:40 a.m. ET (1540 GMT), while U.S. gold futures rose 1.5% to $2,581.40 per ounce, according to Reuters.
The U.S. Labor Department reported that initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 230,000, reinforcing concerns about the cooling labor market. Additionally, U.S. producer prices in August increased slightly more than expected due to higher service costs, but inflation trends still pointed towards easing.
“We are headed towards a lower interest rate environment, making gold a lot more attractive,” said Alex Ebkarian, chief operating officer at Allegiance Gold. He added that the market may see more frequent interest rate cuts, rather than large one-off reductions.
Currently, markets are pricing in an 85% chance of a 25-basis-point rate cut at the Federal Reserve’s meeting on Sept. 17-18, with a 15% chance of a 50-basis-point cut, according to the CME FedWatch tool. Lower interest rates tend to boost demand for zero-yield assets like gold.
Phillip Streible, chief market strategist at Blue Line Futures, noted that if the U.S. labor market continues to weaken, the Fed could extend its rate-cutting cycle for a longer period.
Meanwhile, palladium gained 2.3% to $1,031.00 per ounce, reaching its highest level in over two months. Traders attributed the rally to short-covering after Russian President Vladimir Putin suggested that Moscow could consider limiting exports of key metals like uranium, titanium, and nickel in response to Western sanctions. Although Putin did not specifically mention palladium, its close connection to Russian nickel production could impact supply, exacerbating the current deficit in the palladium market.
“Export restrictions on nickel could reduce production of both nickel and palladium, deepening the palladium market’s deficit,” said Nitesh Shah, commodity strategist at WisdomTree. 
