Gold rallies on weaker US dollar

Gold prices edged higher on Monday, benefiting from the dollar’s decline, touching $2,015 per ounce. If gold prices increase, resistance may be encountered near $2,053 per ounce, while if gold prices decline, support may be found near $1,984 per ounce. 

Gold prices continued to rise for the second week in a row, rising above the key $2,000 per ounce level. Gold prices are propped up by the dollar’s weakness as well as by increased expectations that the Fed has reached its rate ceiling.

GoldThe dollar’s movement has predominantly directed gold prices the competing gold typically loses appeal as an investment when the dollar rises. The dollar remained weak on Monday, and the dollar index dropped to the 103.3 level. US treasury yields also edged lower on Monday, with the US 10-year bond yielding approximately 4.40%.  

Inflation in the US eased more than expected in October, driving down rate hike expectations and boosting gold prices. Headline inflation rose by 3.2% year-on-year in October from 3.7% in September, against expectations of a 3.3% print. 

Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. Gold prices are propped up by expectations that the Fed’s tightening cycle is coming to an end, signaling the start of a Fed pivot. At the latest Fed meeting, FOMC members voted to keep interest rates unchanged at a 22-year high within a target range of 5.25% to 5.50%. The Fed has made it clear that its approach from now on will be data-driven and Tuesday’s inflation data have brought odds of a rate hike in December to zero. Market odds of another rate hike in December have dropped to zero, while markets are pricing in rate cuts as early as May.

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: