Gold Futures declined 0.6% on Tuesday as rising bets on a Federal Reserve rate hike and oil-driven inflation fears outweighed support from a weaker dollar. A yen rally that pressured the greenback offered some cushion, but investors are now watching this week's U.S. inflation print for the next signal on the Fed's move.
Gold Futures declined 0.6% to $4,448.11 an ounce, with Fed rate-hike expectations and renewed inflation concerns overshadowing support from a softer U.S. dollar. XAG/USD traded flat at $66.17 an ounce, while XPT/USD gained 0.8% to $1,838.78. The U.S. Dollar Index fell 0.3% to 98.83.
Yen surge weighs on the dollar
Gold is recovering the previous session's loss as the Japanese yen extended a sharp rally against the dollar that began last week, approaching its strongest level of the year. Traders have increasingly bet the Bank of Japan will raise interest rates, and that move has also weakened the dollar, which normally moves inversely to gold.
A weaker greenback makes dollar-priced bullion cheaper for buyers using other currencies. Gold has therefore found some support from the currency move, even as the broader macro backdrop stays challenging. The metal fell sharply last week and has since traded mostly around the $4,400 level, staying in a narrow range since rebounding from a floor near $4,000 in July.
Oil-driven inflation risk caps the gains
Still, gains are limited by inflation risk tied to disruptions around the Strait of Hormuz. Brent crude approached $100 a barrel after renewed clashes between the U.S. and Iran pushed oil prices higher.
Fed outlook and inflation data remain key
Markets are pricing roughly a 60% chance of a Fed rate hike next week, reflecting the impact of last week's stronger nonfarm payrolls report. The immediate test comes from U.S. consumer price data later this week, which could determine whether the recent jump in rate-hike expectations holds.
Tony Sycamore, senior market analyst at IG, said gold finished lower overnight at around $4,406, pressured by Friday's strong payrolls report and higher energy prices. He expects that combination to push U.S. Treasury yields higher when markets reopen, creating another headwind for bullion.
China's central bank demand continues to provide a floor for gold. The People's Bank of China accelerated its purchases in August to the highest monthly level since 2023, even as bullion prices surged.
Source: Commodities & Futures News
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