Gold prices stable as markets await US inflation data

Gold prices were mostly stable on Monday, dropping slightly to $1,855 per ounce. If gold prices increase, resistance may be encountered near $1,960 per ounce, while if gold prices decline, support may be found near $1,825 per ounce.

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar gained strength in early trading on Monday but dipped later in the day. The dollar index rose as high as 103.8, then dropped to 103.3. US Treasury yields also gained strength early in the day, with the US 10-year bond yielding over 3.75%, but then retreating to 3.72%. 

US CPI data on Tuesday is this week’s most highly anticipated fundamentals and is expected to cause gold price volatility. The rate at which inflation cools is expected to affect the dollar and subsequently gold, as it might influence the Fed’s future policy.

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. The Fed has finally decided to relax its hawkish policy, boosting gold prices. Gold prices surge as the Fed and other central banks start to scale back their aggressive rate hiking. Even though inflation rates remain high, signs of cooling price pressures reduce rate hike expectations, providing support for gold prices. 

Fedspeak over the past week has been hawkish, emphasizing that further rate rises should be expected and that interest rates will need to remain high for a long period. Fed's Bowman stated on Monday that the UC central bank aims to raise interest rates to bring inflation down below 2%. 

Fed Chair Jerome Powell has stated that the disinflation process has begun but warned that it still has a long way to go. The Fed’s stance appears cautiously optimistic, reinforcing the notion that the Fed’s decisions will be based firmly on disinflation rates and the state of the US economy. 

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: