Gold Strengthens as Dollar Weakens and Fed Hike Expectations Fade
Gold prices rose during Monday's trading (August 17), supported by a weakening US dollar and diminishing expectations of a Federal Reserve interest rate hike. Spot gold climbed approximately 0.9% to US$4,417.24 per troy ounce, while US gold futures for December delivery closed 0.8% higher at US$4,473.70.
The dollar's weakness served as a key catalyst. The greenback fell to its lowest level in over two months, hovering near the psychological 100 mark. This made dollar-denominated gold relatively cheaper for investors using other currencies.
Markets also scaled back bets on a Fed rate hike following weaker-than-expected US labor data and consumer inflation figures that showed relatively contained price pressures. The probability of a rate hike in September is now estimated at around 33%, down from over 50% a month earlier.
Investors are now awaiting the minutes from the Fed's July meeting, due Wednesday, for clues regarding the future direction of monetary policy. Expectations of lower interest rates tend to support gold, as they reduce the opportunity cost of holding non-yielding assets.
On the geopolitical front, tensions in the Middle East provided additional support. A senior Iranian official signaled that Tehran could ramp up pressure in the Strait of Hormuz and surrounding regions if diplomatic efforts with the United States fail again. This situation has kept demand for safe-haven assets strong.
Newsmaker Analysis: A combination of a weakening dollar, declining odds of a Fed rate hike, and geopolitical risks has kept gold's momentum positive. However, the market is also beginning to factor in the risk of stagflation—a scenario of weakening economic growth alongside persistent inflationary pressure. As long as gold holds above the US$4,400 level, the potential for further gains remains, though volatility could rise ahead of the release of the Fed minutes.
Source: Newsmaker.id
