Gold advances on weaker dollar as focus shifts to US inflation data

Gold prices gained on Monday, helped by a softer dollar, while focus has now turned to key U.S. inflation data seeking additional signals on the Federal Reserve’s interest rate path after its recent dovish tilt.

Spot gold was up 0.2% at $2,022.19 per ounce. U.S. gold futures was steady at $2,036.50.

“The market is in a pause mode waiting for the next major fundamental economic data-point or news, but it’s a buy the dip mentality among gold traders with the bullish technical posture,” said Jim Wyckoff, senior analyst at Kitco Metals.

The underlying factors that continue to keep a floor in the gold market are the weaker U.S. dollar, easier monetary policy by major central banks, especially the Fed, and a bit of safe haven demand because of the heightened tensions in the Middle East, Wyckoff added.

Last week, the Federal Reserve kept interest rates unchanged and indicated that the historic tightening of monetary policy was likely over as inflation falls faster than expected.

Traders are pricing in about a 70% chance of a Fed rate cut in March, according to CME FedWatch tool.

Lower bond yields and interest rates reduce the opportunity cost of holding non-interest-bearing.

The dollar edged down while benchmark U.S. 10-year Treasury yields were hovering near their lowest level since July.

Traders now await a slew of U.S. economic data, including the November core personal consumption expenditure (PCE) index report on Friday.

Downward trends in U.S. rates are often accompanied by a stronger bullish move of gold and this asymmetric trend might continue and favour gold especially in the first half of next year and prices could average $2,050 an ounce in 2024, Intesa Sanpaolo said in a note.

Spot silver was down 0.6% at $23.6807 per ounce, while platinum rose 1.1% to $950.1691. Palladium was up 0.6% to $1,181.1587.