Gold prices saw a surge on Monday, benefitting from a weakening U.S. dollar, as investors eagerly await forthcoming U.S. inflation data that could influence the Federal Reserve’s decision on interest rates later in the year.
Spot gold exhibited a 0.5% increase, reaching $1,927.39 per ounce as of 0614 GMT, while U.S. gold futures also witnessed a gain of 0.4%, reaching $1,950.80.
Analyst Matt Simpson from City Index noted, “Gold should find solid support above the $1,900 level if we continue to witness a decline in the U.S. dollar, driven by expectations that the Fed has completed its tightening cycle.”
Simpson emphasized that gold had found crucial support around its 200-day moving average, an important technical indicator, which could prove challenging to breach. He added that any undershoot in U.S. inflation figures could further weigh down the dollar.
The forthcoming U.S. Consumer Price Index (CPI) data for August, scheduled for release on Wednesday, is expected to significantly influence the Federal Reserve’s interest rate decisions for the remainder of the year.
Chief Market Analyst Tim Waterer from KCM Trade highlighted that inflation numbers could show an upward trend, driven by rising energy prices, thus keeping the likelihood of another 25-basis-point move by the Fed in November alive.
As the Federal Reserve prepares for its policy-setting meeting later this month, policymakers have conveyed two key messages: They are not eager to raise interest rates, but they are also cautious about prematurely declaring victory.
In response to these developments, the U.S. dollar experienced a 0.5% decline, while benchmark 10-year bond yields decreased by 0.3%. This decline in yields has made non-yielding gold more attractive to international investors.
Tim Waterer, the Chief Market Analyst at KCM Trade, stated in a note that, “The precious metal is likely to rely on a pullback in yields to once again test the $1,950 level.”
In other precious metals, spot silver demonstrated a 0.7% increase, reaching $23.07 per ounce. Platinum also showed a 0.7% gain, reaching $898.55, following a 7% decline in the previous week. Palladium edged 0.7% higher, reaching $1,206.21.
