Gold is once again battling the psychologically important $4,400 level as softer US economic data and a weaker dollar strengthen the case for the Federal Reserve to leave interest rates unchanged in September. Spot gold rose 0.4% to $4,391.07 an ounce in Asian trading, while December futures gained 0.3% to $4,448.10. Bullion reached a two-month high last week and has now gained for two consecutive weeks.
The macro backdrop has shifted markedly in the past two weeks. July consumer prices rose 3.4% year-over-year, down from 3.5% in June, while core inflation eased to 2.5%. Producer prices were unchanged in July and slowed to 4.7% annually. US retail sales unexpectedly fell 0.6% in July, the largest decline in more than a year, and University of Michigan consumer sentiment dropped to 51 from 55.2. Traders now assign roughly a 30% probability to a September rate increase, down from 47% a month earlier. KCM Trade analyst Tim Waterer said softer inflation and dollar weakness are giving gold room to challenge $4,400 again, though a convincing move beyond $4,500 would probably require another leg lower in the dollar or some easing in energy prices.
Technically, the daily chart shows higher lows and a series of bullish candlesticks, with the 50-day moving average providing dynamic support around $4,300. Underlying investment demand is also improving: global physically backed gold ETFs attracted $3 billion in July, while holdings increased by 23 tonnes to 4,068 tonnes. The immediate focus now shifts to minutes from the Fed’s July 28-29 meeting, due Wednesday at 2 pm ET. Gold bulls will look for evidence that policymakers are becoming more comfortable waiting before raising rates again. A sustained break above $4,400 could open the door for a retest of the all-time high near $4,500, while a failure to hold above $4,300 would signal a deeper correction.
