Fed Outlook Weighs on Dollar, Supporting Gold Above $4,400
Gold prices have been steady above $4,400 as market participants weigh the implications of the Federal Reserve's outlook on the US dollar. The recent softening of US data and cooling inflation have reduced expectations for further Fed rate hikes in 2026, which is weighing on the dollar and supporting gold.
The US retail sales declined 0.6% in July, marking the first decrease in nine months and the sharpest monthly drop since May last year. The University of Michigan's Consumer Sentiment Index fell to 51 in August from 55.2 a month earlier. These figures add to evidence of moderating US inflation and further reduce expectations of an imminent interest rate increase by the Federal Reserve.
Despite this, market participants remain concerned that fluctuations in energy prices could complicate the inflation backdrop and prompt the Fed to maintain a hawkish bias. Persistent geopolitical tensions are also lending safe-haven support to the USD, which is constraining further gains in gold.