USD Falls to Two-Month Low as Gold Prices Near $4,400

Gold prices remain near $4,400 as the US Dollar (USD) slumps to a two-month low following decreased expectations for an immediate interest rate hike by the Federal Reserve (Fed). The decline in Fed hike bets has lent support to non-yielding bullion.

Data released on Friday showed US Retail Sales dropped 0.6% in July, marking the first fall in nine months and the biggest monthly decline since May last year. This, combined with cooling US inflation and reduced rate hike expectations for the rest of 2026, has tempered the market's view that there won't be a tightening of policy.

Strategists at BNY note that 'softer U.S. data over the last few weeks have reduced rate hike expectations for the rest of 2026,' with markets increasingly questioning the need for additional tightening late in the cycle. They add that 'further progress on inflation over the next few months could seal the view that there won't be a tightening of policy.'

However, investors remain worried that volatile energy prices could complicate the inflation outlook and force the Fed to stick to a hawkish stance.