Gold Nears June Highs; US Dollar Remains Under Pressure
Gold prices strengthened again early in the week after rebounding from the $4,300 per troy ounce area—a one-week low. While XAU/USD attempted to extend its gains, it struggled to decisively break through the $4,400 level and remained below the high reached last Friday, which was the highest level since June 5.
Currently, gold prices are trading sideways around $4,390 per troy ounce. Support for gold stems from a weakening US dollar following signs of a slowdown in the US economy. US retail sales fell 0.6% in July—marking the first decline in nine months—while the University of Michigan consumer sentiment index dropped to 51 from 55.2 the previous month.
This data, combined with signs that US inflation is beginning to cool, has dampened expectations of an imminent interest rate hike by the Federal Reserve. These conditions support gold, as the precious metal tends to become more attractive when the US dollar weakens and expectations for high interest rates subside.
However, gold's upside remains capped by inflation risks driven by volatile energy prices. Geopolitical risks remain elevated—fueled by US-Iran tensions, the threat of new US sanctions against Tehran, and uncertainty regarding the reopening of the Strait of Hormuz—providing continued support for the US dollar as a safe-haven asset.
Regarding market impact, gold is likely to remain volatile at elevated levels as the market weighs weak US data against energy-driven inflation risks. The CME FedWatch Tool indicates that market participants still assign a roughly 65% probability to the Fed raising interest rates before the end of the year. Attention now shifts to the release of the FOMC minutes on Wednesday, which could offer fresh clues regarding the Fed's policy direction and serve as the next catalyst for XAU/USD. (asd)*
