Gold Rallies as Inflation Cools
Gold prices continued to strengthen during the US trading session on Thursday (July 30). XAU/USD traded around US$4,113 per troy ounce, having touched US$4,120 and rebounded from a daily low near US$4,028. US gold futures also rose nearly 2% to around US$4,111.
Gold's gains were primarily driven by a sharp weakening of the US dollar. The US Dollar Index fell approximately 0.9% to the 99.79–99.95 range—a multi-week low—amid suspected intervention by Japanese authorities that boosted the yen. A weaker dollar increased gold's appeal to non-US buyers.
US economic data also provided support. Core PCE inflation for June slowed to 0.1% month-on-month and 3.3% year-on-year, while headline inflation fell 0.1% month-on-month and eased to 3.7% year-on-year. Although still above the Federal Reserve's target, the data indicated that inflationary pressures were beginning to subside.
US economic growth in the second quarter reached only 1.5% on an annualized basis, down from 2.1% in the previous quarter. The slowdown was largely due to a widening trade deficit, even though consumer spending and business investment remained robust.
Markets also scaled back expectations for near-term interest rate hikes after the Fed held rates in the 3.50%–3.75% range. However, three votes in favor of a hike and persistently high long-term Treasury yields suggest the threat of a tight monetary policy has not vanished. The 30-year yield stood around 5.23%, while the 10-year yield was last recorded near 4.67%.
Consequently, gold retains the potential to test the US$4,120 level, followed by the US$4,150–US$4,200 range, should the dollar remain weak. However, a failure to hold above US$4,100 could trigger a correction toward the US$4,075–US$4,065 range. While the Middle East conflict continues to support demand for safe-haven assets, high oil prices and yields could still cause significant volatility in gold prices. (arl)
Source: Newsmaker.id
