Gold prices fluctuate amid strong dollar and bond yields; investors anticipate key inflation report
Gold prices fell more than 1 percent on Monday due to a risk-on rally in equities and investor profit-taking after a sharp rally in the previous session, according to Reuters.
Spot gold dropped 1.4 percent to US$2,357.88 per ounce as of 2:04 pm ET (1804 GMT), after reaching its highest level since May 22 on Friday. US gold futures settled 1.4 percent lower at US$2,363.50.
On Tuesday, gold prices managed to eke out gains despite a stronger dollar and higher bond yields, as investors anticipated the US June inflation data for more clarity on the interest rate path.
Spot gold rose 0.2 percent to US$2,363.64 per ounce as of 2:35 pm ET (1835 GMT), recovering from the previous session's decline of over 1 percent. US gold futures settled about 0.2 percent higher at US$2,367.90.
The dollar's 0.2 percent increase against its rivals made gold more expensive for other currency holders, while benchmark 10-year Treasury yields inched higher.
Bart Melek, head of commodity strategies at TD Securities, stated, “There's an expectation that the Federal Reserve is more likely to start cutting rates as early as September, which is contributing positively to current market conditions.”
Recent US economic data indicated a slackening labour market, reinforcing expectations that the US central bank will soon cut interest rates.
However, in congressional testimony on Tuesday, Fed Chair Jerome Powell noted that inflation remains above the Fed's 2 percent target but has been improving. Powell added that more positive data would strengthen the case for interest rate cuts.
Attention now shifts to the consumer price index (CPI) data to be released on Thursday. Recent figures have shown a cooling from unexpectedly high levels earlier this year. Han Tan, chief market analyst at Exinity Group, suggested that persistent US inflation could lead to gold losing some of its recent gains.
According to the CME Group's FedWatch Tool, traders currently see about a 75 percent chance of a rate cut in September.
Non-yielding bullion becomes more attractive when interest rates are lower. In other precious metals, spot silver added 0.1 percent to US$30.80 per ounce, platinum fell 1.3 percent to US$983.51, and palladium slipped 2.8 percent to US$980.50.
