(Bloomberg) — Gold advanced to a two-month high above $4,400 an ounce ahead of a key US inflation report that could provide fresh clues to the Federal Reserve’s appetite for an interest-rate hike.
Bullion edged higher in early trading, after adding 3.6% over the previous two sessions. Technical buying was spurred by the metal’s ascent through the 100-day moving average on Monday, another sign of recovery after the emergence of dip-buyers in recent weeks and greater inflows from gold-backed exchange-traded funds in China.
“The tangled pieces around gold are finally starting to move into place, giving this recovery the shape of an early-stage shift into a new cycle,” said Hebe Chen, an analyst at Vantage Markets in Melbourne.
“After being caught in a downside spiral since March, gold is now starting to break away from that pattern,” she said. “More importantly, its ability to rise alongside higher oil prices and a stronger dollar suggests traders are starting to price gold through a different lens.”
Traders are now turning their attention to the latest US inflation data due Wednesday. The closely watched consumer price index is seen rising 0.1% in July following a 0.4% decline in the prior month, according to the median projection in a Bloomberg survey of economists. In the wake of Friday’s weak jobs report, a moderation in price growth may help alleviate some of the inflation anxiety at the Fed.
However, the likelihood of a rate hike by the US central bank — a negative for gold, which doesn’t pay interest — will build if higher energy prices exert more inflationary pressure. US President Donald Trump made sweeping new demands on Iran on Monday, a hardening stance that makes it less likely Washington and Tehran will strike a deal to reopen the Strait of Hormuz and end the months-long war.
Trump also played down the frequency and length of his conversations with Fed Chairman Kevin Warsh, a subject that had raised fresh questions about whether he was seeking directly to influence the central bank. The US leader said he had spoken to Warsh only once, “briefly,” since the chairman assumed the role in May.
The Fed’s Bank of Cleveland President Beth Hammack said it’s possible a number of rate hikes may be needed to bring inflation down to the central bank’s 2% target. Hammack was one of three Fed officials who dissented against last month’s decision to keep borrowing costs steady.
Gold has rallied above the key $4,000-an-ounce support threshold in recent weeks, with renewed investor appetite for the precious metal backed by an increase in central bank purchases. Despite these recent gains, bullion remains about 17% below levels before the Iran war began in late February.
Spot gold advanced 0.5% to $4,410.92 an ounce at 8:38 a.m. in Singapore. Silver rose 0.4% to $65.98 an ounce. Platinum and palladium also pushed higher. The Bloomberg Dollar Spot Index, a gauge of the US currency, fell marginally after gaining 0.2% in the previous session.
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