Gold rose above $4,400 an ounce on Monday as a weaker US dollar and softer economic data reduced expectations for a Federal Reserve interest-rate increase in September. Spot bullion gained 0.9% to $4,417.24 by 1734 GMT, extending its August recovery.
Market Snapshot
Spot gold (XAU/USD) advanced 0.9% to $4,417.24 an ounce, while US gold futures for December delivery settled 0.8% higher at $4,473.70. The dollar fell to its lowest level in more than two months, making dollar-priced bullion less expensive for buyers using other currencies.
The rally extended gold’s gain in August to about 9%. Bullion has recovered sharply after dropping below $4,000 in June, when surging oil prices, higher interest-rate expectations and demand for liquidity weighed on the traditional safe-haven asset.
Silver rose 2.1% to $66.01 an ounce. Platinum gained 1.3% to $1,770.30 and palladium advanced 1.1% to $1,326.92.
Softer Data Weaken Rate Bets
Expectations for another Fed increase have declined after a series of weaker US economic reports. Retail sales fell 0.6% in July, the first decline in nine months and the largest in 14 months. Core retail sales, which more closely track the consumer-spending component of gross domestic product, dropped 0.4%.
The figures followed unexpected job losses in July and relatively subdued consumer inflation. Markets on Monday placed the probability of a September quarter-point increase at about 33%, down from 51.2% a month earlier.
Most economists also expect the Fed to remain patient. In an August 12 to 17 Reuters poll, 94 of 104 economists forecast that policymakers would leave the federal funds rate unchanged at 3.50% to 3.75% at the September 15 to 16 meeting.
Dollar Retreat Supports Bullion
The weaker dollar provided another direct boost to gold. Bullion typically becomes more attractive to international buyers when the US currency declines, while lower interest-rate expectations reduce the opportunity cost of holding an asset that pays no interest.
Bart Melek, global head of commodity strategy at TD Securities, said softer employment conditions and expectations that the Fed could tolerate current inflation were supporting bullion. “A big factor here is the US dollar,” he said.
The latest move also reflects growing uncertainty over whether the US economy can maintain strong growth while inflation remains above the Fed’s 2% target. Weaker consumer activity could encourage policymakers to wait for additional evidence before tightening again.
Gold Rebuilds Haven Appeal
Gold’s August advance marks a reversal from the sharp sell-off that followed the escalation of the US-Israeli conflict with Iran in February. Prices fell from a record $5,595 an ounce in January to below $4,000 in June as the war drove oil prices higher and strengthened expectations for tighter monetary policy.
The recent rebound has taken gold through two important technical resistance areas. Analysts have also pointed to possible renewed buying by institutional investors and central banks, although the extent of that demand remains uncertain. Gold-backed exchange-traded funds added about $7 billion during the first half of August, taking assets under management to around $582 billion.
Independent analyst Ross Norman said the market appeared to be regaining momentum, describing the recent shift as the “handbrake” being released from gold.
Iran Risks Remain in Focus
Geopolitical uncertainty continues to provide underlying support. A senior Iranian official said Tehran could increase pressure in the Strait of Hormuz and elsewhere in the region if diplomatic efforts with Washington failed.
The conflict remains important for gold because a renewed surge in oil prices could produce conflicting forces. Greater geopolitical risk could encourage safe-haven buying, while higher energy costs could lift inflation, Treasury yields and expectations for additional Fed tightening.
Technical conditions could also limit gains. Gold’s relative strength index has approached overbought territory, while its 200-day moving average near $4,504 represents another resistance area.
Outlook
Traders will focus on Wednesday’s minutes from the Fed’s July meeting for clues about how policymakers view persistent inflation, weaker employment and the possibility of another rate increase.
Markets will also watch the US dollar and developments around the Strait of Hormuz. Further economic weakness or a softer dollar could support gold above $4,400, while renewed oil-price pressure or more hawkish Fed signals could challenge the rally.
