Gold set for largest weekly gain since April as dollar sits at 15-month low

Key points

Spot Gold looked set to register its best weekly performance since early April, as investors bolstered wagers that the Federal Reserve would likely complete its rate-hiking cycle by month-end as inflation continued to ease.

Supporting Gold, the US Dollar was hovering above a fresh 15-month trough against major peers.

Earlier in the week it became clear that annual headline CPI inflation in the US had slowed to 3% in June, while annual core CPI inflation – to 4.8%.

Another set of data showed on Thursday that producer price inflation in the US had risen at the smallest annual rate in three years in June. It gave more proof the US economy had probably entered a disinflation phase.

In addition, the latest government report showed the number of Americans filing for unemployment benefits unexpectedly dropped last week, which implied persistent labor market tightness.

Meanwhile, Federal Reserve Governor Christopher Waller said on Thursday that he supported two more quarter percentage point rate hikes this year.

Yet, markets are pricing in an over 90% chance of a 25 basis point interest rate increase later in July and no further hikes for the remainder of 2023.

Rising interest rates tend to weigh on the yellow metal’s appeal, as they translate into a higher opportunity cost of holding Gold, which pays no interest.

According to Ajay Kedia, director at Kedia Commodities, the outlook for Gold remains positive, but there could be some profit-taking at current price levels.

As of 9:37 GMT on Friday Spot Gold was edging down 0.18% to trade at $1,957.19 per troy ounce. Earlier in the session, the metal went up as high as $1,963.79 per troy ounce, which has been its strongest price level since June 16th ($1,967.92 per troy ounce).

The precious metal was set for a 1.61% weekly gain.

Gold Futures for delivery in August were edging down 0.13% on the day to trade at $1,961.15 per troy ounce, while Silver Futures for delivery in September were up 0.14% to trade at $24.985 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.06% to 99.720 on Friday. Earlier in the session, the DXY went down as low as 99.578, which has been its weakest level since April 14th 2022 (99.571).