Gold Rises on Weakening Dollar Ahead of US Inflation Data

(Bloomberg) — Gold gained as the dollar extended its retreat from a record high ahead of US inflation data that could bear on the Federal Reserve’s monetary policy.

Most Read from Bloomberg

The metal rose as much as 1% as the greenback slipped for a second day, providing relief to commodities priced in the currency. Bullion has found a floor near $1,700 an ounce this month after slumping in August on the dollar’s rally.

The swift reversal comes just after speculators turned against the metal, which can accelerate price gains if they buy the futures back to limit losses. Hedge funds trading the Comex substantially boosted their bearish bets to the highest in a month last week, according to data from the Commodity Futures Trading Commission.

“A bit of dollar weakness on top of recent short selling by funds was all it took to get the ball rolling,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

Economists forecast the August US inflation would slow for the second month in a row to 8.1%, potentially easing pressure on the US central bank to keep aggressively hiking rates. Still, officials last week seemed to point to another super-sized increase of 75 basis points in September. Fed Governor Christopher Waller said Friday he favored “another significant” increase.

The European Central Bank lifted rates by 75 basis points last week, and is prepared to do the same when the committee meets in October, said people familiar with the debate. The move is supporting the euro against the dollar, providing some relief for bullion.

“Against recent sharp moves in USD and rates, gold has been relatively resilient,” Bank of America Corp. analysts including Michael Widmer wrote in a note. “Meanwhile the Fed signaling a slowdown in the hiking cycle may ultimately bring new buyers into the market, so we continue to expect upside to gold as we move into 2023.”

Story continues

Spot gold rose 0.7% to $1,728.79 an ounce at 1:46 p.m. in London from its close on Friday. The Bloomberg Dollar Spot Index slid 0.5%, after posting its first weekly drop in four. Silver surged 3.7%, while platinum and palladium also gained.

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.