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Gold Prices Edge Lower as US Data Supports Rate Hike Bets

Gold prices edged lower on Wednesday, hovering near seven-week lows as stronger-than-expected US retail sales data supported the case for the Federal Reserve to keep interest rates higher for longer.

Spot gold was down 0.1% at $1,907.50 per ounce by 2:15 p.m. EDT (1815 GMT), while US gold futures fell 0.2% to $1,910.20.

The US Department of Commerce said retail sales rose 0.6% in July, beating expectations for a 0.3% increase. The strong data came after a report on Tuesday showed that US industrial production also rose in July.

The data boosted expectations that the Fed will continue to raise interest rates in an effort to combat inflation. Higher interest rates tend to make gold less attractive as an investment, as they increase the opportunity cost of holding the non-yielding asset.

Investors are now awaiting minutes of the Fed’s last policy meeting for more clues on the central bank’s rate hike plans. The minutes are due to be released on Wednesday afternoon.

In other precious metals, silver fell 0.3% to $24.27 per ounce, platinum was down 0.5% to $962.50 per ounce, and palladium rose 0.1% to $1,964.50 per ounce.

Here are some other factors that could influence gold prices in the near term:

  • The outcome of the US midterm elections in November. A Republican victory could lead to looser monetary policy, which would be supportive of gold prices.
  • The direction of the US dollar. A stronger dollar makes gold more expensive for buyers holding other currencies, which could weigh on prices.
  • The global economic outlook. A weaker global economy could boost demand for gold as a safe haven asset.