Gold pushed toward $4,400 an ounce on Monday as a softer dollar and fading bets on a Federal Reserve rate hike lifted the metal. Weak consumer sentiment and retail-sales data eased pressure on the Fed to tighten, while unrest around the Strait of Hormuz kept an inflation risk alive through oil.
Gold inched higher on Monday, buoyed by a weaker U.S. dollar and fading expectations that the Federal Reserve will raise interest rates at its next policy meeting. At 01:04 ET, spot gold rose 0.4% to $4,394.31 an ounce, while gold futures gained 0.3% to $4,451.62.
The dollar index, which tracks the greenback against a basket of peers, fell 0.3% to 99.40. A softer dollar can also boost gold's appeal, since it may make bullion less expensive for overseas buyers.
Soft US data cools Fed tightening bets
Gold entered the week after ending the previous week nearly 1% higher, as the latest U.S. data eased fears of an imminent rate increase. Consumer sentiment declined for the first time in three months, while retail sales posted their biggest monthly drop in more than a year.
The softer readings have reduced some of the pressure on the Fed to tighten policy at its September gathering. Lower interest rates can support gold by cutting the opportunity cost of holding the non-yielding asset.
Fed minutes due as Warsh withholds guidance
Investors will get a closer look at policymakers' thinking on Wednesday, when minutes from the Fed's July meeting are due. At that gathering, the Fed held rates steady, but bond markets gyrated afterward as traders parsed comments from Fed Chair Kevin Warsh. Warsh offered no clues about future rate decisions, saying only that the Fed will keep working to bring inflation back to its 2% target.
Three members dissented to the hold, favoring a 25-basis-point hike instead. Without forward guidance from Warsh, investors will likely turn to the minutes to piece together a rough picture of the Fed's next moves.
Hormuz shipping disruption keeps inflation risk alive
Shipping traffic through the Strait of Hormuz eased over the weekend as vessels faced the prospect of attacks, while talks to resolve the conflict between the U.S. and Iran remain stalled. According to shipping data from Kpler cited by Reuters, five commodity vessels passed through the strait on Saturday and none did on Sunday, down from 31 the previous weekend.
Activity in the strait nearly halted after strikes on three vessels operated by the Abu Dhabi National Oil Company last week, which the United Arab Emirates reported. That mix of disrupted shipping and geopolitical tension has kept the outlook for global energy supplies volatile, and any renewed rise in oil prices could complicate the Fed's path toward easier policy.
According to TD Cowen: "oil upside price risks are likely to limit the recent precious metals and copper rally" as inflation risks may still push policy rates higher this year.
Source: Investing.com
Trading involves risk.
Risk Disclaimer
