Gold prices rose to a one-week high on Tuesday, helped by a weaker dollar after slower-than-expected U.S. inflation led to uncertainty over when the Federal Reserve will be. The US (Fed) eases monetary stimulus.
Closing Tuesday’s session, the spot gold contract gained 0.6% to $1,803.69 an ounce. Gold futures added 0.7% to $1,807.10 an ounce.
“Gold is struggling at $1,800 an ounce after weaker-than-expected US inflation data,” said Suki Cooper, precious metals analyst at Standard Chartered Bank. “The macro backdrop remains in favor of gold bulls.”
The core US consumer price index CPI inched 0.1% in August, lower than forecast for a 0.3% increase, and weighed on the dollar. This is the smallest increase since February 2021 and after a 0.3% increase in July 2021.
“While a ‘tighten tap’ announcement is unlikely until the November meeting, the September meeting will introduce members’ forecasts, or 2024 interest rate dot plot. The dot plot for 2024 could reflect two rate hikes in 2023,” Cooper said.
Inflation data could reinforce the view that the Fed may slow down its pace of economic stimulus cuts and keep interest rates low. Lower interest rates can reduce the opportunity cost of holding non-yielding metals.
Ed Moya, Senior Market Analyst at Oanda, said: “The U.S. data falls short of expectations which is good news for gold, as it makes a September tightening announcement from the Fed less likely. more likely.”