Gold Holds Steady as Dollar Eases Slightly
Gold prices slightly rose on Monday (July 6) as the U.S. dollar weakened after investors reduced expectations that the Federal Reserve would raise interest rates this year. The sentiment gave gold fresh support after the precious metal came under heavy pressure in the previous week.
Spot gold was trading around US$4,175.70 per troy ounce. Meanwhile, gold futures moved near US$4,187.30 per troy ounce. The movement showed that gold remained close to a two-week high after posting a weekly gain of more than 2%.
The increase in gold prices came after U.S. Non-Farm Payrolls data released last week showed a sharp slowdown. The weaker labor market data led investors to scale back expectations that the Fed still has strong room to raise interest rates in the near term.
For the Federal Reserve, inflation and the labor market remain the two main factors in determining the direction of interest rates. Although labor market data has started to weaken, U.S. inflation remains relatively high, which could keep the central bank cautious and prevent it from fully turning dovish.
Higher interest rates usually weigh on gold because the precious metal does not offer yield. When bond yields or interest-bearing assets become more attractive, investors tend to reduce their interest in gold. This factor had placed significant pressure on gold prices throughout the year.
Market focus will now shift to the minutes of the Fed’s June meeting, which are scheduled to be released this week. The document is expected to provide clearer guidance on the future path of interest rates. Although gold has managed to recover, its gains may remain limited if sticky inflation keeps the Fed’s tone hawkish.
Source: Newsmaker.id
