Gold Prices Rise as Dollar and Bond Yields Retreat, Investors Await US Inflation Data

Shafaq News/ Gold prices climbed on Wednesday as the dollar and bond yields retreated, while investors awaited U.S. inflation data for further insights into the Federal Reserve's rate-hike policy path.

Spot gold reached its highest level since June 20, rising 0.4% to $1,940.53 per ounce by 0231 GMT. Meanwhile, U.S. gold futures were up 0.5% at $1,946.00.

The decline in the dollar index to its lowest level since May 11, down 0.2%, made gold more affordable for holders of other currencies. Additionally, benchmark 10-year U.S. Treasury yields slipped to their lowest level in nearly a week.

Analyst Yeap Jun Rong from IG noted that there has been renewed confidence in gold prices recently, with expectations for the upcoming U.S. Consumer Price Index (CPI) data to reflect a further moderation in pricing pressures.

Economists polled by Reuters anticipate June's inflation data, to be released at 1230 GMT, to show a rise of 3.1%, following May's 4% surge. This would mark the lowest reading since March 2021. However, core rates are still expected to be significantly above the Federal Reserve's 2% target rate, despite a drop from 5.3% to 5%.

According to CME's Fedwatch tool, markets are pricing in a 92% chance of a 25 basis points rate hike by the Fed at their policy meeting on July 25-26.

The potential for higher interest rates increases the opportunity cost of holding non-yielding bullion. While some Fed members indicated on Monday that the central bank was close to ending its monetary policy tightening, Fed Bank of New York President John Williams reiterated on Tuesday that the bank was not finished raising its short-term rate target.

However, considering that a 25 basis points hike is largely factored into market expectations, coupled with the downward trend in inflation, a significant beat in inflation numbers could lead to a notable recalibration in rate pricing, according to Rong.

In other precious metals, spot silver gained 0.7% to $23.26 per ounce, platinum rose 0.5% to $929.21, and palladium increased 0.2% to $1,253.61.