Dollar Slump Fuels Gold Price Bounce Ahead of Inflation Data
Gold prices edged up on Thursday as the US dollar softened ahead of key inflation data releases. Spot gold rose 0.3% to $4,418.79 an ounce, while the dollar index (DXY) fell 0.3%. The move is seen as a response to shifting expectations around interest rates.
The CME FedWatch Tool suggests that traders see a 60% chance of a Federal Reserve rate hike at next week's meeting. This has implications for gold, as it doesn't pay interest and becomes less attractive when rates rise. When expected rates increase, investors can earn more on cash and bonds instead, which tends to support the dollar.
The markets are focused on whether Thursday's producer price index (PPI) and Friday's consumer price index (CPI) come in hotter or cooler than forecasts. A hotter-than-expected print could lead traders to price in a tighter Fed path, lifting real yields and the dollar and pressuring gold prices.