Gold prices rose on Tuesday on a weaker dollar, while traders awaited a widely anticipated rate hike along with monetary policy clues from the U.S. Federal Reserve over the next two days.
The dollar index edged lower from its near-two-week peak, supporting gold as a weaker dollar makes bullion cheaper for buyers holding other currencies. “After a four-day decline, I suspect (gold) will hold above $1,950 and strive for a technically-driven retracement towards $1,960–$1,965 today. But we really need the FOMC meeting to conclude to see a meaningful move,” said Matt Simpson, a senior market analyst at City Index.
Market focus will be on what Fed Chair Jerome Powell says on Wednesday and European Central Bank President Christine Lagarde on Thursday about the monetary policy outlook for their September meetings.
Gold is highly sensitive to rising interest rates as they increase the opportunity cost of holding non-yielding bullion.Data showed on Monday U.S. and Europe business activity slowed down in July, hinting that both central banks could be close to the end of their rate-hike cycles.
Traders see the Fed keeping interest rates in the 5.25%-5.5% range until 2024, according to CME’s Fedwatch tool.
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