Spot Gold rose on Thursday, mostly due to a pullback in the US Dollar, as investors awaited the Federal Reserve’s annual Jackson Hole, Wyoming symposium this week for guidance on future interest rate hikes.
“Expectations of a hawkish message from FOMC Chair Powell at Jackson Hole will likely keep upward pressure on the US dollar in the run‑up to his speech on Friday,” Commonwealth Bank analysts wrote in an investor note.
“However there is a risk that the speech is deemed not hawkish enough and that we see some retracement in the US dollar.”
Market players now expect the federal funds rate to peak at 3.80% in March 2023, while interest rate futures suggest a 60% chance of a 75 basis point rate hike next month.
According to Brian Lan, managing director at dealer GoldSilver Central in Singapore, monetary policy is expected to be the key driver in the short-term for Gold, with rate hikes affecting consumer behavior.
The yield on benchmark US 10-year Treasury notes was at 3.110% in European trade, after earlier climbing as high as 3.112%.
A rise in near-term interest rates as well as in Treasury yields tends to increase the opportunity cost of holding Gold, which pays no interest.
As of 8:04 GMT on Thursday Spot Gold was gaining 0.61% to trade at $1,762.10 per troy ounce. Earlier today the yellow metal climbed as high as $1,763.73 per troy ounce, which has been its strongest price level since August 18th ($1,772.46 per troy ounce).
The commodity looked set to register its fifth straight month of losses, while being down 0.21%.
Gold futures for delivery in December were gaining 0.79% on the day to trade at $1,775.35 per troy ounce, while Silver futures for delivery in September were up 1.69% to trade at $19.227 per troy ounce.
The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.30% to 108.277 on Thursday. The DXY pulled back from a high of 109.270, registered on Tuesday, which has also been its strongest level since July 14th (109.294).