Gold prices rose to $2,013 on Monday, the highest level in six months. The rise is the latest extension of the bullion’s recent gain, spurred by rising confidence that the Federal Reserve (Fed) would not raise interest rates further. As a result, the US dollar fell in value, making gold less expensive for holders of foreign currencies.
Gold is rising on expectations that the Fed’s tightening is coming to an end
Gold hit a six-month high on Monday as the latest batch of weaker-than-expected economic data fueled optimism that the Fed’s rate-hiking campaign is coming to an end and weakened the dollar.
Spot gold increased by more than 0.5% to $2,013, its highest level since mid-May. Meanwhile, US gold futures rose 0.4% to $2,011.
“What’s moving gold at the moment is the lower U.S. dollar because of the recent soft data. Economic figures coming out of the U.S. this week, both on the growth and inflation front, will make or break a case for whether gold remains above $2,000.”– Capital.com’s financial market analyst, Kyle Rodda.
The US dollar index lost 0.1% versus a basket of currencies, closing in on the two-month low reached last week. A weaker dollar usually improves gold prices by allowing holders of other currencies to purchase the metal at lower prices.
Upcoming Economic Data Could Drive Up Gold Prices Even Further
Following a 6-month high, investors will be watching the revised Q3 GDP figures due on Wednesday with bated breath. A day later, the Fed’s favored inflation gauge, the US PCE price index, will be released.
These economic indicators may provide further information about the Fed’s future monetary policy plans. Recent statistics, such as declining inflation and a cooling labor market, have raised anticipation that the Fed would start cutting interest rates sooner than expected. However, no explicit signals regarding those plans have been made by the Fed.
According to CME’s FedWatch Tool, the market currently anticipates the Fed to forego a rate hike at its December policy meeting, while pricing in a roughly 60% likelihood of a rate decrease in May 2024.
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Lower interest rates reduce the opportunity cost of storing non-interest-bearing gold, which could help gold prices. According to Reuters technical expert Wang Tao, the precious metal may continue its recent gains into a range of $2,026 to $2,023 after clearing the barrier at $1,999 in the short term.
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