Gold prices moved higher on Monday, remaining close to $4,400 an ounce as weakness in the U.S. dollar and softer economic indicators provided support, while uncertainty over Middle East energy supplies continued to pose an inflation risk. At 01:04 ET ( ), XAU/USD gained 0.5% to $4,399.44 an ounce, while Gold Futures advanced 0.4% to $4,455.90. XAG/USD climbed 1.7% to $65.83 an ounce and XPT/USD rose 1.8% to $1,749.15.
The US Dollar Index declined 0.2% to 99.49, making dollar-denominated precious metals relatively cheaper for buyers using other currencies. Gold entered the new trading week after gaining almost 1% over the previous week, helped by economic data that reduced concerns about an imminent Federal Reserve interest rate increase. U.S. consumer sentiment declined for the first time in three months, while retail sales recorded their steepest monthly contraction in more than a year.
Those figures have eased some of the pressure on the Fed to tighten monetary policy. That backdrop is supportive for gold because the precious metal does not generate interest income and generally becomes relatively more attractive when expectations for borrowing costs decline. ANZ analysts have also identified a strengthening inverse relationship between gold and U.S.
Treasury yields, with higher borrowing costs exerting greater pressure on bullion. The brokerage expects gold's trajectory over the coming year to unfold in three broad phases. It initially sees pressure from persistent inflation and a Federal Reserve that remains on hold, followed by an economic slowdown triggered by an energy shock and, eventually, stronger support as monetary policy becomes more accommodative.
ANZ also expects worsening international relations to sustain central-bank demand for gold as a diversification asset and forecasts the metal could reach $5,200 an ounce by the end of the year. Investors will receive further insight into the Federal Reserve's thinking on Wednesday, when minutes from its July policy meeting are due to be released. Softer U.S. economic data have not eliminated the threat of renewed inflation.
Several vessels were attacked in the Strait of Hormuz late last week, while the U.S. said it was preparing additional measures intended to increase economic pressure on Iran. Ships have continued to leave the strategically important waterway, with some vessels reportedly switching off satellite transponders to reduce the likelihood of being detected. Iran and Oman also appear to be making progress towards an agreement governing the management of the Strait of Hormuz, although the United States is not participating in those discussions.
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