Futures & Commodities

Gold bounces back as dollar retreats

People buy jewellery at a showroom on the occasion of Akshay Tritiya, at PP jewellers Karol Bagh on May 3, 2022 in New Delhi, India. Gold prices were flat on Friday and poised for a fourth consecutive monthly drop, as an elevated U.S. dollar and aggressive monetary policies from top central banks continued to erode demand for bullion.
Sonu Mehta | Hindustan Times | Getty Images

Gold bounced to a fresh multi-week peak on Friday with its safe-haven allure getting a fillip as the dollar gave up initial gains following another jump in U.S. inflation, with the current price range also seemingly attracting bids for bullion.

Spot gold rose 0.4% to $1,761.59 per ounce. U.S. gold futures rose 0.7% to $1,762.9.

U.S. consumer spending increased more than expected in June, with monthly inflation surging by the most since 2005.

The dollar quickly gave up small gains following the data, and was last down 0.3%, allowing gold to expand its gains.

The reversal in the dollar, as the markets dig deeper into the data, is pushing metals higher again, said Daniel Pavilonis, senior market strategist at RJO Futures.

Some of it could be safe-haven buying, but overall, it's just a drive into metals, which are "pretty cheap" at the moment, Pavilonis added.

Gold was still bound for its fourth straight monthly drop. It has shed over $300 since climbing past the $2,000-per-ounce level in March, as the Fed embarked on a rapid rate hike path while the dollar also emerged as a preferred refuge amid growing recession risks.

"If we got some more problematic price inflation numbers, the Fed would have to be more aggressive," said Jim Wyckoff, senior analyst, Kitco Metals.

Higher rates increase the opportunity cost of holding non-yielding gold. But gold got some respite, bouncing over 1%, from perception of a relatively less aggressive stance from Fed Chair Jerome Powell on Wednesday following an expected 75 basis-point hike.

Silver rose 1.4% to $20.26 per ounce, platinum was up 0.8% at $894.88 and palladium jumped 2.2% to $2,122.58.

Meanwhile, second biggest gold consumer India launched its first international bullion exchange to bring transparency to the market.