Gold prices surged to their highest level in approximately a month on Thursday, driven by a weaker dollar following US inflation data that raised hopes of the Federal Reserve adopting a more dovish stance on monetary policy.
Spot gold rose by 0.1% to $1,958.99 per ounce as of 1040 GMT, marking its highest level since June 16. Meanwhile, US gold futures also climbed 0.1% to $1,962.90.
The declining value of the dollar made gold more affordable for investors holding other currencies. Additionally, benchmark US yields hit their lowest point in over a week, reducing the opportunity cost of holding non-yielding gold.
With the Fed’s next meeting just two weeks away and recent data indicating a slowdown in job growth and inflation in June, there is growing anticipation that the next interest rate hike could be the final one. Carlo Alberto De Casa, an external analyst at Kinesis Money, highlighted this sentiment, suggesting that the outlook for gold remains positive.
In June, US consumer prices experienced a modest increase, marking the smallest annual rise in over two years as inflation continued to ease.
Investors are closely monitoring Thursday’s release of initial jobless claims data for the week ending July 8, which is expected to show a reading of 250,000 compared to the previous week’s 248,000. Additionally, June’s producer price index data and remarks from Fed Board Governor Christopher Waller will provide insights into the central bank’s stance on monetary policy tightening.
Analysts at Commerzbank noted that if inflation continues to decline and economic weakness raises the likelihood of rate cuts in the coming year, gold could potentially reach new all-time highs.
In broader markets, European shares saw gains, although weak trade data from China limited overall sentiment. Most base metals experienced price increases.
Among other precious metals, spot silver rose by 0.5% to $24.27 per ounce, platinum surged by 1.7% to $962.25, and palladium gained 1.1% to $1,296.92.