As traders awaited the widely anticipated rate hike and monetary policy hints from the U.S. Federal Reserve over the next two days, gold prices increased on Tuesday on a weaker dollar.
By 0358 GMT, spot gold had increased 0.4% to $1,961.74 per ounce, while U.S. gold futures had increased 0.1% to $1,963.40.
A weakening dollar makes gold more affordable for buyers holding foreign currencies, bolstering the dollar index as it dipped from its nearly two-week high. [USD/]
“After a four-day loss, I predict that (gold) will maintain above $1,950 and try to retrace today’s decline to $1,960-$1,965. But in order to observe a significant change, the FOMC meeting must come to an end, according to Matt Simpson, a senior market analyst at City Index.
Market attention will be on what Fed Chair Jerome Powell and European Central Bank President Christine Lagarde have to say about the prospects for monetary policy at their September meetings on Wednesday and Thursday, respectively.
Because storing non-yielding bullion increases the opportunity cost, gold is quite sensitive to rising interest rates.
Data released on Monday indicated that corporate activity in the United States and Europe slowed in July, suggesting that both central banks may be nearing the end of their rate-hike cycles.
According to traders polled by CME’s Fedwatch tool, the Fed will likely maintain interest rates in the 5.25%–5.5% range until 2024.
According to Simpson, gold’s best chance of setting new records is when “the Fed announces an end to their tightening cycle without a recession on the horizon.”
While output of gold firms resumed normal operations in the first half of 2023, gold consumption in China increased 16.37% year over year.
After officials promised to intensify policy support for the economy, key state-owned banks in China were observed selling dollars to buy yuan in both domestic and international spot markets, helping to boost the currency. [MKTS/GLOB][CNY/]
Platinum increased by 0.7% to $962.84, palladium increased by 1.2% to $1,285.76, and spot silver increased by 0.7% to $24.54 per ounce.