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Gold prices edged up on Monday as the US dollar fell to multi-month lows as the prospects for further interest rate hikes in the United States this year dimmed following softer US economic data last week.
The US Government had reported on Friday that consumer prices were unchanged in June and retail sales declined for a second straight month. The soft inflation and domestic demand figures undermined arguments for the US Federal Reserve to raise interest rates, with traders cutting back their bets on the likelihood of an increase in December.
The dollar huddled near a 10-month trough on Monday as upbeat Chinese news and the prospect of only gradual policy tightening in the US sent investors piling into leveraged positions in higher yielding currencies and risky assets. The US dollar index edged up 0.1 per cent to 95.278, having touched its lowest since September.
The weaker greenback supported gold since the dollar-priced commodity was less expensive for investors holding other currencies.
“Investor sentiment (for gold) has improved quite dramatically over the past week, especially with the weak data out of the United States last week,” said ANZ analyst Daniel Hynes.
“Gold is now primed for another rally.”
Spot gold had risen 0.2 per cent to $1,230.43 per ounce at 0632 GMT. US gold futures for August delivery climbed 0.2 per cent to $1,229.50 per ounce.
Risk sentiment among investors got an added boost after Chinese economic data handily topped forecasts with second-quarter gross domestic product rising 6.9 per cent from a year ago.
On the technical front, gold is likely to significantly break above key resistance at the 200-day moving average near $1,230 per ounce and could even rise to the $1,250 level in the shorter term, Hynes said.
“The technical bounce looks fairly solid,” he said.
Spot gold may gain further to $1,239 per ounce, as it has cleared resistance at $1,226, according to Reuters technical analyst Wang Tao.
Among other precious metals, spot silver rose 0.5 per cent to $16.02 per ounce, after hitting $16.09, the highest in over a week, earlier in the session. Platinum was up 0.8 per cent at $922.80 per ounce, after touching its highest in two weeks at $924.80 Palladium edged lower by 0.1 per cent to $857.50 per ounce.
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