Gold prices declined in early trading on Tuesday as traders remained cautious ahead of a potential interest rate cut by the Federal Reserve in September. At 07:45 GMT, spot gold (XAU/USD) was trading at $2,496.39 per ounce.

The yellow metal had a strong performance in August, reaching a new record high of $2,531. However, market focus is now shifting towards the upcoming US non-farm payroll report, which is set to be released on Friday.

The findings of the payroll report are expected to be pivotal in shaping expectations for the Federal Reserve’s next move on interest rates. This data release is especially significant following Federal Reserve Chair Jerome Powell’s recent emphasis on safeguarding employment rather than solely focusing on inflation. Analysts suggest the jobs data will be key to determining the magnitude of the Federal Reserve’s anticipated rate cut.

Economists are forecasting an addition of 165,000 jobs in the US for August, up from an increase of 114,000 in the previous month. Analysts believe that job figures around this consensus could indicate a soft landing for the economy, prompting the Fed to ease its policy by 25 basis points this month.

Market sentiment has shifted slightly, with the probability of a 25-basis-point rate cut now standing at 69%, while the likelihood of a more substantial 50-basis-point reduction has fallen to 31%, according to the CME FedWatch tool.

With inflation appearing stable and other economic indicators pointing to a slowdown, there is growing confidence that the Federal Reserve will begin easing monetary policy this month. This expectation is providing continued support for gold prices, keeping them near their historic highs.


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