The price of gold rose by about 0.55%, almost offsetting yesterday's drop (-0.67%) caused by US inflation data, which reduced the likelihood of a Fed rate cut by 0.5% in September. Today's price recovery is due to the weakness of the US currency, as well as the opinion that yesterday's fall was excessive.
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 0.02% to 102.59, but remains near its lowest level since August 5.
Investors are also preparing for the release of a new batch of US data that will help clarify the prospects for the Fed's monetary policy. At 12:30 GMT, the weekly report on initial jobless claims will be released, as well as July retail sales data, and at 13:15 GMT, the industrial production report for July will be published. Industrial production is expected to have declined in July as high interest rates remain a major obstacle to maintaining recent strength in the sector. Meanwhile, capacity utilization is likely to have also fallen. The start of the FOMC policy easing cycle should give the industrial sector some respite, but a full recovery is still far away. According to the CME FedWatch Tool, markets see a 37.5% probability of a 0.5% rate cut in September (down from 55% a week earlier), and a 45.1% probability of 0.25% rate cut in November (down from 52.1% a week earlier). A low interest rate environment tends to boost non-yielding bullion's appeal.