Gold prices surged to record highs above $2,490 per ounce on Friday, rising more than 1.7% at 9:50 a.m. EST. A weakening U.S. dollar and declining Treasury yields fueled the rally.

The rise in gold prices reflects growing anticipation that the Federal Reserve will initiate a series of rate cuts.

Inflation Decelerates

July's inflation data, for both producer and consumer prices, slightly undershot expectations this week, reinforcing the disinflationary trend that is firmly on track.

Producer prices rose just 0.1% month-over-month in July, following a 0.2% increase in June, and came in below the 0.2% forecast. On an annual basis, producer inflation slowed to 2.2%, down from 2.7% in June.

Consumer inflation also decelerated for the fourth consecutive month, with the annual inflation rate dropping to 2.9% in July, the lowest since March 2021, compared to 3% in June. Core inflation, which excludes volatile food and energy prices, also eased to 3.2% from 3.3% in June, matching expectations.

Traders have slightly moderated their expectations for a large 50-basis-point Fed rate cut in September, now leaning towards a smaller 25-basis-point cut, with a 73% probability priced in. By the end of the year, markets are pricing in a total of 80 basis points in cuts, implying two additional 25-basis-point reductions at the Fed's November and December meetings.

Chart: Largest Gold-Backed ETF Reaches Record Highs

Gold ETFs See Strong Inflows

In July, global gold ETFs, which include the SPDR Gold Trust (NYSE:GLD) as well as several others, had their strongest month since April 2022, attracting $3.7 billion, marking the third consecutive month of inflows, according to data from the World Gold Council (WGC).

North American funds led the charge, with inflows of $2 billion, more than offsetting minor outflows in May and June.

The WGC commented that “July was unprecedented on the political front with the assassination attempt on Trump followed by Biden stepping down from the presidential race. Gold ETF inflows around both dates suggest increased safe-haven demand.”

Jackson Hole Symposium in Focus

Looking ahead, all eyes are on the Jackson Hole Symposium, scheduled for Aug. 22-24, which comes just weeks before the Fed’s anticipated rate cuts in September.

Historically, gold has shown strength following the Jackson Hole Symposium, as the WGC highlighted. This has often been followed by a pullback as bond yields tend to rise in the subsequent weeks.

Gold Miners Moving On Friday

The five best-performing gold mining stocks within the VanEck Gold Miners ETF (NYSE:GDX) by 10:00 a.m. ET included:

Industry heavyweights such as Newmont Corp. (NYSE:NEM) and Barrick Gold Corp. (NYSE:GOLD) were 0.8% and 2.3% higher respectively.

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