Gold Rebounds on Weakening Dollar and Cooling US Data

Gold prices bounced back on Friday after reaching their weekly low of $4,311. The US Dollar Index softened and expectations of a near-term Federal Reserve rate rise eased, contributing to gold's recovery. The precious metal traded around $4,372 as the dollar weakened.

The recent data from the US revealed cooling growth, with July Retail Sales falling 0.6% month on month, versus forecasts for a 0.1% rise. Additionally, inflation and labor market indicators showed easing price pressures.

Market participants are now pricing in a 70% chance that the Federal Reserve will hold rates steady in September. Historically, gold has performed well when real yields decline and the dollar weakens, similar to the massive bull runs seen during the inflationary shocks of the late 1970s and 2022.

For traders looking at the long side, a breakout above the 100-day Simple Moving Average of $4,386 could signal a strong buy. However, persistent inflation risks from high oil prices could still trigger future rate hikes and cap gold's gains.