Gold Prices Rise as Softer Dollar and Easing Fed Bets Provide Support

Gold prices edged higher on Monday, trading just below the $4,400 per ounce level, as a weaker U.S. dollar and cooling expectations for further Federal Reserve interest rate hikes bolstered the precious metal's appeal.

By 1:04 AM ET, spot gold was up 0.4% at $4,394.31 per ounce, while gold futures rose 0.3% to $4,451.62 per ounce, according to data from Investing.com. The metal is building on a gain of nearly 1% from the previous week, driven by fresh U.S. economic data that has eased concerns about imminent monetary tightening.

Fed Policy in Focus

Recent reports showing a drop in U.S. consumer confidence for the first time in three months, alongside the largest monthly decline in retail sales in over a year, have reduced pressure on the Federal Reserve to raise rates at its September meeting. Lower interest rates typically benefit gold, as they decrease the opportunity cost of holding the non-yielding asset.

The U.S. Dollar Index, which measures the greenback against a basket of major currencies, fell 0.3% to 99.40. A softer dollar makes gold less expensive for buyers holding other currencies, which can stimulate demand.

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Upcoming Minutes and Geopolitical Risks

Investors are now awaiting the release of the minutes from the Fed's July policy meeting on Wednesday for further clues on the central bank's thinking. The source material noted that at that meeting, which was described by Fed Chair Kevin Warsh as a "fierce family debate," three members dissented in favor of a 25-basis-point rate hike.

Meanwhile, geopolitical tensions are adding another layer of complexity for markets. Shipping traffic through the Strait of Hormuz has slowed significantly amid threats of attacks and stalled U.S.-Iran negotiations. According to shipping data from Kpler cited by Reuters, vessel transit has nearly halted, raising concerns about global energy supplies and potential inflationary pressures from higher oil prices.

Analysts at TD Cowen noted the potential headwind for metals, stating in a research note, "The risk of a sustained move higher in oil prices could cap the near-term upside for precious metals and copper as inflation risks could drive policy rates higher this year."