Weaker Dollar Lifts Gold Prices Amid Reduced Rate Hike Expectations

Gold prices edged higher on Monday as investors continued to monitor geopolitical tensions in the Middle East. The weaker US dollar made gold cheaper for buyers holding other currencies, with the dollar falling to its lowest level in over two months.

Bart Melek, global head of commodity strategy at TD Securities, noted that the gold market appears to be pricing in a stagflationary environment, with softer employment and expectations that the Fed will tolerate current inflation levels.

Markets pared bets on a Federal Reserve rate hike after last week's weaker-than-expected US payrolls report and subdued consumer inflation data. The probability of a September rate increase fell to 33% from 51.2% a month earlier, according to CME's FedWatch Tool.