Gold Bugs Fly On Soft U.S Dollar

Tuesday marked the first higher closing for gold futures in three sessions, as weakness in the greenback boosted the demand for the precious metal.

At the time of writing this report, the precious metal traded near $1,775 an ounce.

Markets are assessing whether tightening will begin earlier than expected to curb inflationary pressures, which has caused a recent fluctuation in bullion prices.

Randal Quarles, Mary Daly, and Chair Jerome Powell are likely to speak and discuss the Fed’s tapering plan soon, following Governor Christopher Waller’s comments Tuesday that interest-rate increases are still some times off.

A few long dollar positions, as well as short Treasury bonds and gold bets, was liquidated as a result. Gold’s broad trading range is likely to consolidate further, at least until the FOMC meeting in November.

The market appeared to realize last week that the September minutes of the Federal Reserve was “slightly too aggressive.”.

At this moment, $1800 is a crucial psychological level for bulls, as it may stimulate enough buying to propel prices higher towards $1825 and $1845.

Holding the yellow metal, which pays no interest, is often considered a hedge against inflation, but a Fed interest rate hike would increase the opportunity cost.

Despite this, the greenback has failed to capitalize on strong US Treasury yields and trades below the 94.00 price band, helping the precious metal find traction near lower levels.

The stagflation theme and weakness in the dollar are supporting precious metals in recent weeks. As rival currencies that are on the cusp of taking off catch up with the greenback, the dollar was under pressure on Tuesday amid profit-taking.