Gold Bounces on Soft Dollar, But Hawkish Central Bank Expectations Cap Upside
Gold prices rebounded from their lowest level in a week on Wednesday, reaching $4,340 during the Asian session. The Bank of Japan-inspired rally in the Japanese Yen has kept the US Dollar near its two-week low, benefiting gold. However, hawkish central bank expectations may limit any significant appreciation for the non-yielding bullion.
The European Central Bank is expected to raise interest rates by 25 basis points on Thursday, while traders have already priced in a rate hike from the Bank of Japan at their September meeting. The Reserve Bank of Australia is also considering a potential rate increase later this month.
According to strategists at BNY, the strong US jobs data has re-anchored expectations for further Federal Reserve tightening, with over 60% expecting a September interest rate hike. Escalating US-Iran tensions may limit deeper losses for the safe-haven USD and cap gold prices.