Market Insider

Gold gains on dollar retreat, focus on U.S. inflation data

Gold prices edged up on Monday as Treasury yields fell, while investors awaited key U.S. inflation data and Federal Reserve officials’ comments through the week for fresh clues on the potential timing of the central bank’s interest rate cut.

Peter M. Fisher | The Image Bank | Getty Images

Gold prices rose on Monday, helped by a pullback in the dollar, while investors looked forward to U.S. inflation data due later this week that could offer more clarity on the Federal Reserve’s monetary policy.

Spot gold was last up 0.54% to $2,332.7905 per ounce. U.S. gold futures settled 0.6% higher, to $2,344.40.

The dollar fell 0.29% against its rivals, making gold attractive for other currency holders.

Gold is in consolidation mode and there is active buying on dips, said David Meger, director of alternative investments and trading at High Ridge Futures Traders, adding that they are looking for the trajectory of interest rates moving forward and the timing of those potential rate cuts.

Focus this week will on the U.S. Personal Consumption Expenditures (PCE) data, the Fed’s preferred measure of inflation, which is due on Friday.

Also on the radar, several Fed officials will speak this week, including Fed Governors Lisa Cook, and Michelle Bowman. On Monday, San Francisco Fed President Mary Daly, said “there is still work to do” before the Fed can start cutting rates.

Traders are currently pricing in a 66% chance of a Fed rate cut in September, according to CME FedWatch Tool.

“We believe gold can hit $3,000/oz over the next 12-18 months, although flows do not justify that price level right now,” BofA said in a research note.

“Achieving this would require non-commercial demand to pick up from current levels, which in turn needs a Fed rate cut to happen. An inflow into physically backed ETFs and a pick-up in LBMA clearing volumes would be an encouraging first signal.”

Lower rates reduce the opportunity cost of holding bullion.

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