Softening Dollar Boosts Gold as Market Awaits Additional Fed Guidance

Earlier this week, the price of gold rose, a weaker dollar driving the increase. Spot gold hit $2,524.94 an ounce, just a few dollars short of its $2,531.60 record, while U.S. gold futures dropped to $2,552.90. The dollar index also dropped 0.3%, which made the precious metal more attractive to holders of other currencies.

RJO Futures senior market strategist, Bob Haberkorn, stated that a lot of buying occurred after gold was given a little push following a decrease in the value of the U.S. dollar. Currently, the precious metal is up more than 20% since the end of last year while the dollar has dipped almost 1% in the same period.

ANZ senior commodity strategist, Daniel Hynes, posits that gains in gold were muted by weak demand for physical gold in China. Last month, gold imports into the east Asian nation hit 44.6 tons, which represents a 24% drop. This is its lowest level in more than two years and follows an already steep drop in data recorded in June when gold imports fell 57% from May’s figures.

The Shanghai Gold Exchange premium over London also dropped last month, with the daily average plunging from $28 to $12 in June.

This news comes as investors await inflation data, which may offer insights on the anticipated reduction in rates of interest by the Federal Reserve in September. The Personal Consumption Expenditures is seen by many as the Central Bank’s preferred gauge on inflation and will be rolled out this week.

Kitco Metals senior market analyst, Jim Wyckoff, expects that the Central Bank’s policy will be influenced by hotter-than-expected data on inflation. Wyckoff also expects that the Fed will still reduce rates of interest next month and later again in the year.

Data from the CME FedWatch tool estimates that interest rates will be reduced by about 25 basis points next month, adding that there’s a 36.5% chance of a larger 50 basis point drop.

On the other hand, bullion seems to be performing very well, its price remaining above the $2500 level. Its performance is being driven by lingering concerns about conflict in the Middle East and investor optimism about upcoming rate cuts in the U.S.

Apart from gold, other metals also seem to be doing well, with palladium rising to $975.78 an ounce. Spot silver also hit $30.07 an ounce, representing a 0.6% increase. On the other hand, the price of platinum dropped to $960.90 an ounce.

If the market for gold continues on its current trajectory, gold exploration companies such as Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are likely to attract more investor attention as people look to benefit from gold’s rising prices.

NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF

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