Gold futures settled notably higher on Tuesday amid expectations the Federal Reserve will end its tightening cycle sooner than earlier expected.
In addition to soft consumer price and producer price inflation, data showing a smaller than expected increase in retail sales and a drop in industrial production have added to expectations about the Fed pausing on interest rate hikes sometime soon.
The dollar’s recovery from lower levels limited gold’s downside. The dollar index, which dropped to 99.59 in the Asian session, climbed to 100.10 later in the day, gaining nearly 0.25%.
Gold futures for August ended higher by $24.40 or about 1.3% at $1,980.80 an ounce, a six-week closing high.
Silver futures for September ended up $0.238 at $25.256 an ounce, while Copper futures for September settled at $3.8295 per pound, down $0.0145 from the previous close.
Data from the Commerce Department showed retail sales edged up by 0.2% in June after climbing by an upwardly revised 0.5% in May. Economists had expected retail sales to advance by 0.5% compared to the 0.3% growth originally reported for the previous month.
Meanwhile, the Fed said industrial production slid by 0.5% in June, matching the downwardly revised decrease in May. Economists had expected production to come in unchanged compared to the 0.2% dip originally reported for the previous month.
“Gold traders have their rally caps on after ECB’s Knot signaled they could be ready to pause in September and after Canadian inflation dropped to the BOC’s control range for the first time since March 2021. Global bond yields are falling and that is good news for bullion investors,” says Edward Moya, Senior Market Analyst at OANDA.
“Gold might struggle to make a run at the $2000 level, but that could change if bond yields continue to come down and the Fed signals they are likely done hiking next week after delivering one last quarter-point rate rise,” Moya adds.
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