Gold Prices Rise on Fed Rate Cut Expectations; Palladium Surges Amid Russian Supply Concerns

Gold prices climbed on Thursday, supported by expectations of a US Federal Reserve rate cut next week, while palladium reached its highest level in over two months due to potential supply disruptions from Russia. Spot gold rose by 0.3%, trading at $2,517.88 per ounce at 0942 GMT, bolstered by support from the 21-day moving average at $2,505, according to Reuters.

The increase in gold prices follows a marginal rise in US consumer prices in August, with underlying inflation showing some persistence. This could lead the Federal Reserve to implement a smaller 25-basis-point interest rate cut at its upcoming meeting.

Carsten Menke, an analyst at Julius Baer, noted that the market appears to be reacting to expectations of moderately lower US interest rates. "Gold seems to find support around the $2,500 mark, at least in the short term, as the current interest rate outlook provides a stable base," Menke commented.

Traders are awaiting further data to guide the Fed's decision, including the US Producer Price Index (PPI) for August, initial jobless claims due later today, and consumer sentiment data expected on Friday.

Meanwhile, palladium rose 0.6% to $1,014 per ounce, reaching an earlier high of $1,030.68, its highest since July 8. The surge came after Russian President Vladimir Putin suggested on Wednesday that Moscow might limit exports of critical metals like uranium, titanium, and nickel. Although palladium was not specifically mentioned, it is a by-product of Russian nickel production, which raised concerns about potential supply constraints.

"Palladium is primed for a short-covering rally," said Nitesh Shah, commodity strategist at WisdomTree. He explained that any export restrictions on Russian nickel could also reduce palladium production, deepening the current market deficit.

Russia’s Nornickel, the world’s largest producer of palladium and a major platinum producer, accounts for 41% of global palladium output and 12% of platinum production.

In other precious metals, spot silver increased by 0.4% to $28.81, and platinum gained 0.3%, trading at $953.79.