Gold Pushes Back to $4,400 as Fed Debate Shifts

Gold prices have risen to near $4,400 as a weaker US dollar and softer economic data strengthen the case for the Federal Reserve to leave interest rates unchanged in September.

The spot gold price rose 0.4% to $4,391.07 an ounce on Monday, while December futures gained 0.3% to $4,448.10.

A weaker dollar index helped push gold prices higher, as a falling US currency makes gold cheaper for buyers using other currencies.

The latest advance in gold prices reflects a shift in the Fed's debate over the past two weeks, with July consumer prices rising 3.4% from a year earlier, down from 3.5% in June, and core inflation easing to 2.5%.

US retail sales unexpectedly fell 0.6% in July, their largest decline in more than a year, while University of Michigan consumer sentiment dropped to 51 from 55.2.

Traders now assign roughly a 30% probability to a September rate increase, down from 47% a month earlier, which generally helps gold prices as bullion itself pays no interest.

KCM Trade analyst Tim Waterer sees softer inflation and dollar weakness giving gold room to challenge $4,400 again, but notes that a convincing move beyond $4,500 would probably require another leg lower in the dollar or some easing in energy prices.