Gold firms on softer US dollar; inflation data and Mideast risks in focus

Gold prices rose on Wednesday (Sept 9) due to a weaker US dollar, while ongoing tensions between the US and Iran and upcoming inflation data kept investors on watch for interest rate expectations. Spot gold climbed 0.6% to $4,381.32 per ounce by 0505 GMT. US gold futures dropped 0.3% to $4,424.70. The US dollar remained relatively stable, making gold more attractive to holders of other currencies.

Analyst Kelvin Wong of Oanda noted that the gold market is experiencing a tug-of-war between bulls and bears, which may persist until the release of the consumer price index report next week. Expectations of a hawkish Federal Reserve weigh on gold, but concerns over the US dollar's devaluation and fiscal deficits support prices.

Markets are anticipating US producer price index data on Thursday, with the Consumer Price Index due on Friday. Escalating conflicts in the Mideast have resulted in a surge in Brent crude prices, which typically fuel inflation. According to the CME FedWatch Tool, there is a 60% probability that the Federal Reserve will raise interest rates at its next meeting.

While gold is typically seen as a hedge against inflation, high interest rates reduce its appeal. Commodity strategist Kelly Xu of Alpine Macro stated that precious metals face a short-term test, but significant selling is unlikely. Tightness in the physical market and structural supply deficits provide fundamental support for silver in the long run.

Spot silver rose 0.9% to $66.31, platinum increased 1.1% to $1,833.58, and palladium declined 0.1% to $1,347.82.