Gold edges higher as weaker US dollar offsets inflation risks
A gauge of the US dollar has fallen about 0.4 per cent, making the metal cheaper for many buyers.
Gold rose slightly on September 9 after a three-day dip, as a weakening US dollar helped offset inflation concerns fueled by attacks on ships in the Middle East. The precious metal gained up to 0.7% on that day, rebounding from a 2.6% decline over the previous three sessions. The US dollar index fell around 0.4% this week, making gold more affordable for many buyers.
According to Manav Modi, a commodity analyst at Motilal Oswal Financial Services, higher crude prices have increased worries that surging energy costs could keep inflation elevated. Meanwhile, the Japanese yen reached a seven-month high against the dollar, providing some support to gold prices. Oil prices continued their climb, with Brent crude closing near $100 a barrel, which further bolstered arguments for a potential rate hike from the Federal Reserve before the Sept 14-15 meeting.
Traders are closely monitoring upcoming inflation data for clues about the central bank's future actions. A lower-than-expected reading could offer a reprieve for gold traders, supporting the argument for maintaining current interest rates. However, an unexpected rise in inflation could strengthen the case for a rate hike, potentially placing significant pressure on gold.
Monetary policy tightening usually poses a challenge for gold, as it does not yield interest. Swaps traders currently estimate a 60% probability of a Federal Reserve rate increase in September. Since bouncing from a low point near $4,000 an ounce in July, gold has been fluctuating within a relatively narrow range around $4,400, as traders continuously assess the outlook for Fed policy.
Despite short-term obstacles, many investors remain optimistic about gold's long-term prospects, viewing it as a stable hedge for their portfolios. At present, gold's consolidation around $4,400 suggests the market is waiting for a clear signal to determine its next direction. Ahmad Assiri, a market strategist at Pepperstone Group, noted that the Consumer Price Index (CPI) result could provide the necessary catalyst for a significant move.
Spot gold increased by 0.5% to $4,378.60 an ounce in Singapore at 11:45 am. Silver climbed 0.8% to $66.298 an ounce, while platinum advanced by 1%, and palladium remained unchanged. The Bloomberg Dollar Spot Index, which measures the US currency, decreased by 0.1%.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
