Gold futures finished higher Monday for a second straight session, finding support as the U.S. dollar weakened and investors looked ahead to this week’s key consumer-price index reading for August.
Price action
-
Gold for December delivery
GC00,
+0.02% GCZ23,
+0.02%
rose $4.50, or 0.2%, to settle at $1,947.20 an ounce on Comex, after a 1.2% fall last week. -
December silver
SIZ23,
-0.16%
added 21 cents, or 0.9%, at $23.38 an ounce, after suffering a 5.7% drop last week. -
December copper
HGZ23,
-0.04%
settled at $3.81 a pound, up 2.4%. -
Platinum for October delivery
PLV23,
+0.12%
climbed 0.8% to $902.30 an ounce and December palladium
PAZ23,
-0.10%
added 2.3% to $1,219.20 an ounce.
Market drivers
Overall, gold has struggled to gain ground since early August as Treasury yields pushed back to the upside and the U.S. dollar found strength. Higher bond yields raise the opportunity cost of holding nonyielding assets like gold, while a stronger dollar makes commodities priced in the unit more expensive to users of other currencies.
The dollar’s bounce took a respite Monday, however, as the Japanese yen
USDJPY,
surged following remarks by Bank of Japan Gov. Kazuo Ueda, who hinted that the country’s long-running negative interest rate policy could be nearing an end.
The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, was off 0.5%, trimming its month-to-date gain to 0.9%. Strength in the dollar tends to pressure dollar-denominated prices for gold.
Still, gold futures managed to snap a three-session decline to finish slightly higher on Friday.
“The slight recovery in gold buying momentum over recent trading sessions is likely to face a test of time ahead of the upcoming U.S. CPI reading. which is considered as the main-event risk for traders this week,” said Jameel Ahmad, chief analyst at Dubai-based brokerage GTC.
“At the moment, the market has shifted tone towards expecting the U.S. dollar to remain as the best friend of investors for the rest of 2023, which does suggest on headline that the upside in gold is limited,” he said in emailed commentary.
More information: See the U.S. economic calendar
Wednesday’s reading of the August consumer price index, meanwhile, will be closely watched for clues to the Federal Reserve’s rate path. The dollar and Treasury yields have been boosted by expectations the Fed will need to keep rates higher for longer in response to a run of persistently strong economic data.
Should the CPI reading show that inflationary pressures in the United States remain at strong levels and are not trending lower to the point where the Fed “can become more downbeat in their tone, the risk for gold traders will likely be that the precious metal can still decline closer towards the $1,900 handle,” said Ahmad.
Read: The Fed is done raising interest rates, ABA economists say, and the U.S. is poised for a soft landing
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