Gold futures edged higher early Monday, 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,
+0.36% GCZ23,
+0.36%
rose $6.30, or 0.3%, to $1,949 an ounce on Comex, after a 1.2% fall last week. -
December silver
SIZ23,
+0.93%
was up 21.1 cents, or 0.9%, at $23.385 an ounce, after suffering a 5.7% drop last week.
Market drivers
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 0.3%, trimming its month-to-date gain to 1.1%. 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.
“Later this week brings the latest U.S. inflation data and this will be another key data point for traders and investors to price in the likelihood of the Federal Reserve keeping interest rates unchanged at the committee’s meeting later this month, particularly if inflation is showing to be tracking closer to the bank’s 2% target,” said Rupert Rowling, market analyst at Kinesis Money, in a market commentary.
“However, while U.S. interest rates may not go any higher, they do look set for a period of being higher for longer, which will chip away at gold’s appeal, given the physical metal’s lack of yield,” he wrote. “So enjoy plus $1,900 an ounce gold while it lasts but the next phase looks increasingly challenging.”