Gold inches higher after soft US data dim chance of imminent rate increase
Bengaluru — Gold prices edged up on Monday as the US dollar fell to multi-month lows after the prospect for further interest rate increases in the US this year dimmed following softer US economic data last week.
The US government reported on Friday that consumer prices were unchanged in June and retail sales declined for a second consecutive month.
The soft inflation and domestic demand figures undermined arguments for the US Federal Reserve to raise interest rates, with traders cutting back their bets on the likelihood of an increase in December.
The dollar huddled near a 10-month trough on Monday as upbeat Chinese news and the prospect of only gradual policy tightening in the US sent investors piling into leveraged positions in higher-yielding currencies and risky assets.
The dollar index edged up 0.1% to 95.278, having touched its lowest since September.
The weaker greenback supported gold since the dollar-priced commodity was less expensive for investors holding other currencies.
"Investor sentiment [for gold] has improved quite dramatically over the past week, especially with the weak data out of the US last week," said ANZ analyst Daniel Hynes. "Gold is now primed for another rally."
Spot gold had risen 0.2% to $1,230.43/oz at 6.32am GMT. US gold futures for August delivery climbed 0.2% to $1,229.50/oz.
Risk sentiment among investors got an added boost after Chinese economic data handily topped forecasts with second-quarter GDP rising 6.9% from a year ago.
On the technical front, gold was likely to significantly break above key resistance at the 200-day moving average near $1,230/oz and could even rise to the $1,250 level in the shorter term, Hynes said.
"The technical bounce looks fairly solid," he said.
Spot gold could gain further to $1,239/oz, as it had cleared resistance at $1,226, said Reuters technical analyst Wang Tao.
Among other precious metals, spot silver rose 0.5% to $16.02/oz, after hitting $16.09, the highest in more than a week, earlier in the session.
Platinum was up 0.8% at $922.80/oz, after touching its highest in two weeks at $924.80.
Palladium edged lower by 0.1% to $857.50/oz.