Gold prices rise as weaker dollar, softer US data boost rate-cut hopes
Gold prices moved higher on Monday as a weaker US dollar and subdued economic data strengthened expectations that the Federal Reserve may keep interest rates unchanged at its upcoming policy meeting.
Spot gold gained 0.4% to $4,391.07 per ounce by 0248 GMT, extending its recent momentum after the precious metal reached a more than two-month high during the previous week. US gold futures for December delivery also advanced 0.3% to $4,448.10 per ounce.
The dollar’s decline provided additional support to bullion. The US dollar index fell 0.1%, making gold and other dollar-denominated commodities relatively cheaper for buyers using other currencies.
According to Tim Waterer, chief market analyst at KCM Trade, gold began the week with strong momentum as weaker inflation data put pressure on the dollar and created room for bullion to approach the $4,400 threshold.
Waterer said a sustained rise beyond the $4,500-per-ounce level would likely require further weakness in the dollar or a clearer decline in energy prices.
US economic data shape rate expectations
Recent US economic indicators have played a major role in reshaping expectations for Federal Reserve policy. An unexpected contraction in US nonfarm payrolls in July, combined with relatively moderate consumer-price inflation, has reduced market expectations for an interest-rate increase at the Fed’s next meeting.
Data from the CME FedWatch Tool showed that traders were assigning a roughly 30% probability to a September rate hike, down from about 47% a month earlier.
Expectations surrounding interest rates are closely watched by gold investors because bullion does not generate interest or dividends. When borrowing costs and yields are lower, the opportunity cost of holding gold declines, potentially increasing demand for the precious metal.
Market participants are therefore looking ahead to the minutes of the Federal Reserve’s July meeting, scheduled for release on Wednesday. Investors will examine the minutes for indications about policymakers’ views on inflation, employment and the future direction of monetary policy.
Any indication that the central bank is becoming less inclined to raise rates could provide additional support to gold, while a more hawkish tone could strengthen the dollar and place pressure on bullion.
Geopolitical tensions remain in focus
Geopolitical developments also continued to influence financial markets.
US President Donald Trump’s representatives met Egyptian, Qatari and Turkish mediators in Cairo on Sunday as diplomatic efforts continued to advance a proposed Gaza peace plan, according to a diplomatic source.
The talks were taking place against the backdrop of continued Israeli military operations in Gaza. Ongoing tensions in the Middle East have kept investors alert to the possibility of further disruptions to energy markets and global trade.
Gold traditionally attracts safe-haven demand during periods of geopolitical and economic uncertainty. Any escalation in regional tensions could therefore influence investor flows into precious metals.
Other precious metals gain
Other major precious metals also recorded gains during Monday’s session.
Spot silver climbed 1.4% to $65.53 per ounce, extending its positive momentum. Silver tends to benefit from both investment demand and expectations surrounding industrial activity.
Platinum advanced 0.3% to $1,752.36 per ounce, while palladium rose 1.6% to $1,333.35.
