Dollar Weakness Boosts Gold Prices as Fed Pause Expectations Rise

The US dollar dipped last Friday, while gold prices rose, ending the week higher. Market attention focused on U.S. inflation and employment data, which were broadly in line with expectations. The figures indicated a cooling labor market, reinforcing expectations that the Federal Reserve will keep interest rates unchanged next month.

The US Dollar Index weakened by approximately 0.3%, making dollar-denominated gold more attractive to overseas buyers. This decline is one of the main external factors supporting gold prices during the session. In precious metals markets, the U.S. dollar and gold prices often move inversely.

Softer inflation and employment signals boosted expectations of a Fed hold. U.S. nonfarm payrolls for July unexpectedly declined, while inflation data released during the week was broadly in line with market expectations. The CME FedWatch Tool indicates that markets are pricing in a 33% probability of a Fed rate hike in September, down significantly from 55% a week earlier.