Gold prices soared to a six-month peak on Monday, bolstered by a declining U.S. dollar and speculation that the U.S. Federal Reserve has concluded its interest rate hike cycle. The focus has now shifted to upcoming U.S. inflation data later in the week, adding an element of suspense to the precious metal’s trajectory.
As of 0404 GMT, spot gold experienced a 0.4% surge, reaching $2,009.69 per ounce, while U.S. gold futures rose by 0.3% to $2,009.50.
Kyle Rodda, a financial market analyst at Capital.com, highlighted the influence of the weakening U.S. dollar on gold’s recent movements. He stated, “What’s moving gold at the moment is the lower U.S. dollar because of the recent soft data,” emphasizing that economic figures from the U.S. this week will play a pivotal role in determining whether gold can sustain its position above the $2,000 mark.
Gold initially rallied during the session, reaching as high as $2,017.82 per ounce. Rodda suggested that this surge might have been characteristic of a thinner Asian market.
The dollar index (.DXY) exhibited a 0.1% decline against other currencies, remaining close to a more than two-month low reached last week. This depreciation makes gold more attractive for holders of other currencies, contributing to its upward momentum.
Investor attention is now focused on the revised U.S. third-quarter GDP figures scheduled for release on Wednesday, followed by the U.S. PCE price index, the Federal Reserve’s preferred inflation metric, on Thursday. A recent inflation report indicated weaker-than-expected consumer inflation, fueling optimism that the Fed might consider easing monetary conditions sooner than anticipated.
Traders widely anticipate that the Fed will maintain interest rates in December, with around a 60% likelihood of a rate cut in May next year, according to CME’s FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-interest-bearing assets like gold.
In the broader economic landscape, Japan’s October services PPI rose to 2.3%, up from a revised 2% in September. This development has added to the belief that the Bank of Japan might terminate negative rates in 2024.
In the realm of precious metals, spot silver witnessed a 1.3% gain, reaching $24.61 per ounce, while platinum experienced a 0.3% decline to $927.48. Palladium, on the other hand, rose by 0.1% to $1,069.85 per ounce. The dynamics in these markets reflect the intricate interplay of global economic factors influencing investor sentiment.
