Gold prices climbed as a weaker US dollar and softer economic data strengthened expectations around Federal Reserve interest-rate policy.
KARACHI: Gold prices rose on Monday as a weaker US dollar and softer U.S. economic data strengthened expectations that the Federal Reserve may hold interest rates steady at its upcoming policy meeting, supporting demand for the precious metal.
Spot gold gained 0.4% to $4,391.07 per ounce by 0248 GMT, extending gains after bullion reached a more than two-month high last week. U.S. gold futures for December delivery also advanced 0.3% to $4,448.10 an ounce.
The decline in the dollar provided another boost to gold. The U.S. dollar index fell 0.1%, making dollar-denominated commodities relatively cheaper for buyers holding other currencies.
Tim Waterer, chief market analyst at KCM Trade, said gold entered the week with strong momentum after weaker inflation data pressured the dollar and created room for bullion to move closer to the $4,400 mark.
However, a sustained move above $4,500 an ounce could require further weakness in the dollar or a clearer decline in energy prices, Waterer said.
US data reshape interest-rate expectations
Recent economic indicators have increased uncertainty over the Federal Reserve’s next policy move. An unexpected contraction in U.S. nonfarm payrolls in July, combined with relatively moderate consumer-price inflation, has reduced expectations of an interest-rate increase at the Fed’s next meeting.
Data from the CME FedWatch Tool showed traders were pricing in about a 30% probability of a September rate hike, down from roughly 47% a month earlier.
Interest-rate expectations are closely linked to gold demand because bullion does not pay interest or dividends. Lower borrowing costs and yields can reduce the opportunity cost of holding gold, making the asset more attractive to investors.
Markets will now focus on minutes from the Federal Reserve’s July meeting, due Wednesday. Investors are expected to examine policymakers’ views on inflation, employment and the future direction of monetary policy.
A less hawkish stance could provide additional support to gold, while signals of tighter policy could strengthen the dollar and weigh on bullion.
Geopolitical risks support safe-haven demand
Geopolitical developments also remain an important factor for precious-metal markets. U.S. President Donald Trump’s representatives met Egyptian, Qatari and Turkish mediators in Cairo on Sunday as diplomatic efforts continued over a proposed Gaza peace plan, according to a diplomatic source.
The discussions came amid continuing Israeli military operations in Gaza. Persistent Middle East tensions could keep investors focused on potential risks to energy markets and global trade.
Gold often attracts safe-haven demand during periods of geopolitical and economic uncertainty, meaning any escalation could influence investment flows into precious metals.
Silver, platinum and palladium also gain
Other major precious metals also advanced during Monday’s session.
Spot silver rose 1.4% to $65.53 an ounce, while platinum gained 0.3% to $1,752.36. Palladium climbed 1.6% to $1,333.35 an ounce.
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