The price of gold fell by about 0.4%, which was caused by the strengthening of the US dollar and the correction of positions by investors ahead of the publication of important US inflation data, which may affect the extent of monetary policy easing.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.29% to 100.84, diminishing gold's attractiveness for foreign currency holders.
Experts said that gold is still overall bullish, given the expectations of easing the Fed's monetary policy in September. According to the CME FedWatch Tool, markets see a 34.5% probability of a 0.5% rate cut in September (down from 38% the week before), and a 65.5% probability of a 0.25% rate cut (up from 62.0% the week before), with a 1% rate cut expected by the end of the year. A low interest rate environment tends to boost non-yielding bullion's appeal.
Market participants are currently awaiting the core personal consumption expenditures (PCE) index - the Fed's preferred inflation measure – which will be presented on Friday. Consensus estimates suggest that core PCE grew by 0.2% m/m and 2.7% per annum after increasing by 0.2% m/m and 2.6% per annum in June.
Meanwhile, data showed that in July, net gold imports to China via Hong Kong increased by about 17% compared to June, recording the first increase since March.