Gold Hits $2,013 and Sets a 6-Month High as the US Dollar Retreats
The price of gold edged higher to $2,013 on Monday – marking its highest point in six months. The upswing represents the latest extension in the bullion’s recent uptrend, driven by growing convictions that the Federal Reserve (Fed) will deliver no more interest rate hikes. This weakened the US dollar, making gold less expensive for other currency holders.
Gold Rises on Hopes that Fed’s Tightening Is Over
Gold touched a six-month high on Monday as the latest softer-than-expected batch of economic data raised hopes that the Fed has reached the end of its rate-hiking campaign and weakened the dollar.
Spot gold rose more than 0.5% to $2,013, its largest mark since mid-May. Meanwhile, US gold futures climbed around 0.4% to $2,011.
“What’s moving gold at the moment is the lower U.S. dollar because of the recent soft data. Economic figures coming out of the U.S. this week, both on the growth and inflation front, will make or break a case for whether gold remains above $2,000.”– Capital.com’s financial market analyst, Kyle Rodda.
The US dollar index fell 0.1% against a basket of currencies, slipping closer to the two-month low it hit last week. A weaker dollar typically boosts gold prices by allowing holders of other currencies to buy the bullion at more attractive prices.
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Upcoming Economic Data Could Boost Gold Further
After reaching a 6-month peak, investors will closely monitor the revised Q3 gross domestic product (GDP) data due on Wednesday. Also, the new US PCE price index data – the Fed’s preferred inflation gauge – is due a day later.
These economic indicators could offer additional insights into the Fed’s future monetary policy plans. Recent data, including slowing inflation and a cooling labor market, elevated expectations that the central bank could begin cutting interest rates sooner than expected. However, there have been no official hints from the Fed about those plans yet.
Currently, the market broadly expects the Fed to skip a rate hike at its December policy meeting while pricing in a roughly 60% chance of a rate cut in May 2024, CME’S FedWatch Tool shows.
If that happens, it could bode well for gold prices as lower interest rates reduce the opportunity cost of holding non-interest-bearing gold. In the near term, the precious metal may extend its recent gains into a range of $2,026 to $2,023 after clearing the resistance at $1,999, said Reuters technical analyst Wang Tao.
Where do you expect gold prices to end in 2023? Let us know in the comments below.