Gold above $4,600 driven by US budget deficit concerns

Gold prices rose amid ongoing concerns about the so-called erosion of the US dollar’s purchasing power, as attention shifted to highly anticipated remarks by US Federal Reserve Chair Kevin Warsh this week.

Spot gold rose 0.4 percent to $4,611.16 per ounce, while US futures gained 0.3 percent to $4,664.50.

Markets analyst Kelvin Wong at OANDA said gold is receiving medium-term support from talk of the dollar’s eroding purchasing power, alongside worries about the US budget deficit. Gold prices rose more than 5 percent last week after the US Treasury Department’s move to expand its repurchase operations for old long-term bonds, renewing fears of the dollar’s weakening purchasing power.

Warsh’s remarks at the annual Jackson Hole symposium in Wyoming are expected to draw close scrutiny as investors search for clues about the future direction.

“The market is waiting for the speech to gain more clarity on how the Federal Reserve will handle the current economic landscape. If it does not provide specific forward guidance on monetary policy, market expectations regarding interest rate hikes are likely to remain unchanged,” Wong said.

According to CME’s FedWatch tool, markets are pricing in a 36.1 percent chance of a US interest rate hike in September and a 72.1 percent chance by December.

Data showed that annual US inflation remained in July at a level well above the central bank’s 2 percent target. The unexpected halt in the downward trend of the latest inflation surge, driven by the Iran war, is likely to intensify discussions within the central bank over whether to raise interest rates or keep them unchanged.

X.com market analyst Linh Tran said, “The $4,700 level remains a significant short-term barrier. Gold may need to consolidate within the $4,500 to $4,700 range before gaining new momentum.”

For other precious metals, spot silver rose 1 percent to $68.77, platinum increased 0.5 percent to $1,837.48, and palladium rose 0.1 percent to $1,329.81.