Gold set to rise this week as the dollar drops

14 Jul 2023 , 12:04 PM

The U.S. dollar was trading around a more-than-year low on Friday as investors wagered that the Federal Reserve will soon stop raising interest rates, setting the stage for gold prices to post their biggest weekly gain since April.

Spot gold remained unchanged at $1,958.45 per ounce and up 1.8% for the week. At $1,963.00, U.S. gold futures were essentially unchanged.

Data released on Thursday revealed that U.S. producer prices hardly increased in June, adding to the growing body of evidence that the economy has entered a disinflationary period.

In the meanwhile, unexpectedly fewer Americans than expected last week filed new applications for unemployment benefits, a sign that the labour market was still tight.

Governor of the Federal Reserve Christopher Waller stated on Thursday that the July meeting should result in an increase in interest rates and that he is not yet prepared to declare the U.S. inflation situation to be under control.

The Federal Open Market Committee (FOMC) is expected to raise rates again at its meeting on July 25–26, according to interest rate futures, but prospects of more hikes have decreased.

Gold is now more affordable for foreign investors thanks to the dollar index, which reached its lowest point since April 2022. Meanwhile, the yield on 10-year U.S. Treasury notes remained close to a two-week low set in the previous session.

During times of political and financial unpredictability, gold is regarded as a secure investment, but increasing interest rates raise the opportunity cost of owning non-yielding bullion.

In a different country, Australia replaced Philip Lowe as central bank governor on Friday with Michele Bullock.

Platinum lost 0.4% to $968.65, palladium lost 1.4% to $1,277.35, while spot silver declined by 0.2% to $24.814 per ounce.

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