Gold shines as dollar dips: Eyes on inflation data for Fed's next move

Gold prices have inched closer to a three-week high, supported by the ongoing weakness in the dollar. At the time of writing, spot gold has recorded a 0.6% increase, reaching $1,937.07 per ounce.

“The reaction to the US inflation data is dependent on how fast it is slowing down… only if inflation surprises on the downside, gold would benefit, as it would indicate a sooner end in the Fed hiking cycle,” said UBS analyst Giovanni Staunovo.

Ongoing central bank gold purchases also contribute to the positive sentiment surrounding gold, noted UBS’s Staunovo.

Gold tends to gain during economic or financial uncertainty, while lower rates boost the appeal of the zero-yield asset.

The dollar index touched its lowest level since May 11, making gold cheaper for holders of other currencies.

Several US central bank officials have expressed the view that while the Federal Reserve may need to raise interest rates further to address inflation, there is a growing belief in the market that the current tightening cycle is approaching its conclusion.