Gold Rebounds on Softer US Dollar and Fading Rate Hike Bets
Gold prices rebounded on Friday after hitting a fresh weekly low of $4,311. The precious metal's recovery was driven by a softer US Dollar and fading expectations of an imminent Federal Reserve interest rate hike.
The latest US data showed that retail sales fell 0.6% month-over-month in July, missing expectations for a 0.1% increase. This weak spending figure follows a string of softer US economic releases this week, including lower-than-expected consumer price index and producer price index data.
Analysts at MUFG noted that the slowdown in private employment and wage growth in recent months has provided more leeway for the Fed to keep interest rates on hold. The CME FedWatch Tool indicates that traders are now pricing in a 70% chance of no rate hike in September, creating a supportive near-term backdrop for gold.
However, the inflation outlook remains uncertain, with long-dated US Treasury yields remaining high due to persistent inflation risks. This could limit gold's upside and keep buyers cautious about chasing the metal higher.