Gold extended a two-week advance as pared back expectations for further Federal Reserve rate hikes put pressure on the dollar, making bullion cheaper for most buyers.
The precious metal rose as much as 0.9% before paring gains to trade near $4,400 an ounce, after ending the previous week almost 1% higher. The latest US data showed declines in both consumer sentiment and retail sales, helping to ease fears of imminent monetary tightening, which is typically a headwind for non-yielding bullion.
A gauge of the US dollar was its lowest since May, making bullion that’s priced in the currency cheaper for many buyers. Swaps are no longer fully pricing in another US interest rate increase before the end of the year, as they were just a week ago.
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Markets don’t believe the Fed is truly hawkish in the near term,” said Justin Lin, an analyst at Global X ETFs.
Meanwhile, volatility continued to shroud energy markets as more ships came under attack in the Strait of Hormuz late last week, while the US said it was preparing to impose new measures aimed at crippling Iran’s economy. Fresh fighting in Lebanon also muddied the outlook for a deal to end the US-Iran war.
However, efforts to keep barrels flowing through Hormuz are helping keep a lid on oil prices and assuaging concerns over energy-driven inflation.
Gold’s recovery above the key $4,000-an-ounce threshold has been driven by renewed investor appetite and an increase in central bank purchases, notably from China. Gains last week took the metal above its 100-day moving average for the first time since April, and it continues to hover near that level.
Bullion “will require a meaningful break above $4,400 to confirm that its positive momentum has further room to run,” said Global X ETFs’ Lin. “The recent bounce, while mostly driven by technicals, has also priced in most of the positive catalysts from the past week, so we may see gold trade relatively flat” until the next clear catalyst, he added.
The minutes of the Fed’s July policy meeting due for release on Wednesday are set to provide some clarity on rate considerations.
Spot gold was 0.3% higher at $4,387.74 an ounce as of 1:30 p.m. in London. Silver rose 1.3% to $65.55 an ounce, after gaining almost 2% last week. Platinum and palladium advanced. The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.2%.
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