Gold rose over 1% on Tuesday to a more than one-month high, bolstered by a softer dollar and lower Treasury yields, with investors betting that recent U.S. economic readings make the case for a pause in the Federal Reserve’s interest rate hikes.
Gold advanced 1.25% to settle at $1,980.8 per ounce. The dollar index wobbled near more than a one-year low, making bullion more affordable to buyers holding other currencies. Benchmark Treasury yields ticked lower for the second straight day.
“Gold can certainly move towards $2,000 if incoming data suggests the Fed will back off after one more hike this month,” said Jim Wyckoff, senior market analyst at Kitco.
Gold traders also took stock of data showing headline U.S. retail sales rose less than expected in June, though consumer spending appeared to be solid.
While the data boosted the idea of a less hawkish Fed materializing by the end of this year, which would help gold, prices could fall to the $1,900 range if the central bank goes the other way, Wyckoff added.
Traders are pricing in another 25-basis point rate hike at the Fed’s July 25-26 meeting.
Higher interest rates increase the opportunity cost of holding zero-yielding gold.
“Gold has now reached a key technical area around $1,980-$1,985, where it had previously found support and resistance. The bulls will need to see gold clear this level on a closing basis if they want to see $2,000 plus again,” Fawad Razaqzada, market analyst at City Index, said.
Silver settled up 0.95% at $25.256, while platinum added 0.7% to $994.4. Palladium rose 2.76%.