Gold prices climbed on Monday, edging closer to the $4,400 level as a softer US dollar and weaker economic indicators renewed expectations that the Federal Reserve would keep interest rates steady in September.
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AAPLWeaker dollar and economic data support gold
Spot gold gained 0.4% to $4,391.07 an ounce during Asian trading hours, while futures for December delivery advanced 0.3% to $4,448.10. The latest increases extended a two-week winning streak for bullion after it reached a two-month high last week.
Recent signs of cooling US inflation have contributed to gold’s rally. Consumer prices rose 3.4% year-on-year in July, compared to 3.5% in June, with core inflation easing to 2.5%. Producer prices remained flat in July and their annual rise slowed to 4.7%.
The trend strengthened on Friday as US retail sales unexpectedly declined by 0.6% in July, marking the largest drop in more than a year. In addition, University of Michigan consumer sentiment fell to 51 from 55.2 in June.
Meanwhile, the US dollar index slipped 0.1%, which made gold more affordable for international buyers using other currencies. Traders now estimate the likelihood of a September rate hike at just 30%, down from 47% a month ago. Lower interest rate expectations typically benefit gold, which does not offer yield.
KCM Trade analyst Tim Waterer sees the combination of lower inflation readings and dollar weakness providing space for gold to test the $4,400 level again.
However, Waterer notes that a convincing push above $4,500 would probably require a further decline in the dollar or moderation in energy prices.
Technical resistance at $4,400
Despite gold’s momentum, prices have been unable to sustain a close above $4,400 in recent sessions. Gold futures finished last week at $4,380.40, representing a 0.9% weekly gain and more than 8% rise over two weeks. This persistent rebound suggests strong underlying demand, even though profit-taking has capped advances near recent highs.
Analysts identify the $4,400 to $4,500 range as a significant resistance area. A sustained breakout above that level could prompt momentum-driven traders to re-enter the market. On the other hand, another rejection could see prices retreat toward the $4,300 support.
Investment in gold-backed exchange-traded funds (ETFs) also continued to improve. In July, global physical gold ETFs attracted $3 billion in inflows, with total holdings increasing by 23 tonnes to 4,068 tonnes, reversing the sharp outflows witnessed in June.
As more investors look to access gold directly and efficiently, market participants are increasingly seeking alternatives to traditional brokers. While conventional markets still operate through intermediaries, a significant shift toward Web3 has taken shape. Investors are now leveraging platforms such as 1stepSwap to hold tokenized shares of major US companies, gold, and silver directly in crypto wallets. This development enables exposure to real-world assets with improved pricing and removes the need for middlemen.
Fed minutes could shape gold’s outlook
Market focus now turns to the minutes from the Federal Reserve’s July 28-29 policy meeting, which are scheduled for release on Wednesday at 2 pm ET. The documentation should provide deeper insights into how central bankers perceived inflationary pressures and the potential for further policy tightening.
Investors with bullish positioning in gold will be closely watching for indications that policymakers favor delaying additional rate increases.
There is a risk, however, that Fed officials remain concerned about persistent inflation, particularly against a backdrop of high energy prices, which could cap further declines in Treasury yields and prevent gold from decisively surpassing $4,500.
If the Fed minutes highlight lingering worries about inflation, gold may face renewed resistance as yields stay elevated and sentiment shifts hesitantly.
