Gold Rises as Dollar and Oil Fall Ahead of US Inflation Data

Gold prices rose today as the US dollar and oil prices declined, while investors await key US inflation data and remarks from the Federal Reserve chairman later this week for clues about the direction of monetary policy.

Bob Hapcorn, a market analyst at StoneX, said: “The dollar and oil are lower this morning, so we are seeing a swinging effect. I expect a quieter session ahead of the data releases tomorrow and the day after.”

Investors are awaiting consumer price index data on Wednesday, while producer price index data on Thursday and comments from Federal Reserve Chairman Kevin Warsh will be closely scrutinized.

The International Monetary Fund highlighted today the risks stemming from rising public debt levels and increasing bond yields, which could rise further due to inflationary pressures caused by the war.

Analysts at Commerzbank wrote in a note: “Interest rate hikes have increasingly become a double-edged sword for gold. While higher interest rates increase the opportunity cost of holding non-yielding assets like gold, they also increase the financial burden on many governments, thereby exacerbating concerns about debt sustainability.”

According to the CME Group’s FedWatch tool, traders are pricing in a 19% probability of a US interest rate hike this month, compared to an 88% probability for a hike in December.