The price of gold rose by about 0.5% after falling by 0.59% yesterday. The price recovery is due to a drop in US bond yields, as well as a correction in investors' positions ahead of the publication of US inflation data.
Meanwhile, 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 0.07% to 101.16, but remains near a 13-month low.
Experts said that the long-term prospects for gold look positive, but a price correction is possible in the short term, especially if any data weakens expectations of easing the Fed's monetary policy. According to the CME FedWatch Tool, markets see a 34.5% probability of a 0.5% rate cut in September (up from 24% the week before), and a 65.5% probability of a 0.25% rate cut (down from 76.0% the week before), with a 1% rate cut expected by the end of the year. Bullion, a non-yielding asset, is more appealing in a low interest rate environment.
As for the US data, later today will be presented the GDP report for the 2nd quarter, as well as weekly data on initial jobless claims, but the key event of the week will be tomorrow's publication of the core personal consumption expenditures (PCE) index - the Fed's preferred inflation measure. 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, yesterday, the president of the Federal Reserve Bank of Atlanta, Rafael Bostic, said that given the decline in inflation and rising unemployment, it may be time to move to lower interest rates.