Gold gets reprieve on dollar dip, toned-down rate hike bets

People browsing gold jewelry in the window of a gold shop in Istanbul's Grand Bazaar in Turkey on May 05, 2022 in Istanbul, Turkey. Gold inched higher on Friday, as the dollar rally eased, although the greenback's remarkable performance overall and fears of aggressive U.S. interest rate hikes weighed on demand for bullion and set prices for a fifth straight weekly loss.
Burak Kara | Getty Images News | Getty Images

Gold recovered some ground on Monday, lifted by a retreat in the dollar as the market toned down the chances of a 100-basis-point rate hike by the U.S. Federal Reserve next week.

Spot gold was up 0.02% at $1,707.2 per ounce after rising 1% earlier in the session. U.S. gold futures rose 0.13% to $1,706.2. Last week, bullion hit its lowest level in nearly a year due to the dollar's rampant rise, which made gold more expensive for holders of other currencies.

"We are seeing quite a nice rebound for gold as the dollar is weaker," Edward Moya, senior analyst with OANDA, said.

Gold investors now a little optimistic as the debate is now between a 50 and 75 bp hike by the Fed, Moya added. The dollar index eased 0.9% on Monday, slipping from its near 20-year high.

Data on Friday showed U.S. consumers tempered their inflation expectations in July, a development likely to be welcomed by Fed officials worried that expectations for high inflation could complicate their task of reining in price increases. Rising interest rates make the non-interest bearing gold seem less appealing.

The European Central Bank's in its meeting later this week is expected to raise rates by 25 bps. Meanwhile, China Construction Bank Corp said it would suspend some types of trading in gold and silver for clients, starting on Aug 15.

Spot silver shed 0.21% to $18.65 per ounce. Platinum jumped 1.24% to $861.36, while palladium gained 1.15% to $1,849.68.

The platinum market is forecast to have a surplus this year, an indication of relatively weak market fundamentals amid COVID-19 lockdowns and lower consumer spending in China, Heraeus Precious Metals wrote in a note.