Dollar Weakness Fuels Gold Rally as Fed Rate Hike Odds Fall

Gold prices have regained ground near $4,400 as softer US economic data and weaker inflation expectations weigh on the dollar. The precious metal rose 0.4% to $4,391.07 an ounce in Asian trading, while December futures gained 0.3% to $4,448.10.

The dollar index slipped 0.1%, providing another tailwind for gold as a weaker US currency makes it cheaper for buyers using other currencies. This has given gold room to challenge the key $4,400 area again, according to KCM Trade analyst Tim Waterer, who believes a convincing move beyond $4,500 would require further dollar weakness or an easing in energy prices.

The rally still faces resistance, however, as gold failed to hold its recent move above $4,400. The $4,400-$4,500 area is becoming an important test for the metal, with a sustained break potentially encouraging momentum traders to rebuild positions and another rejection sending bullion back towards the $4,300 support zone.