Gold steadies as US dollar pulls back

By Brijesh Patel

(Reuters) – Gold prices steadied on Tuesday, buoyed a dollar retreat, although expectations that the Federal Reserve will likely keep interest rates higher for longer after strong U.S. data kept bullion near the six-week low.

Spot gold was little changed at $1,905.19 per ounce by 1:51 p.m. EDT (1751 GMT), having hit its lowest level since June 29 at $1,895.50 earlier in the session.

U.S. gold futures settled 0.5% lower at $1,935.2.

U.S. retail sales jumped 0.7% last month, the Commerce Department said on Tuesday, suggesting the economy was continuing to expand early in the third quarter. Economists polled by Reuters had forecast retail sales would climb 0.4%.

“Another impressive retail sales report, which suggests the economy is not weakening and that’s going to force the Fed to keep the prospect of more rate hikes on the table,” said Edward Moya, senior market analyst of the Americas at OANDA.

“The $1,900 per ounce is a key level for a lot of traders when they focus on gold. At times it can trade extremely technical and we can see some key support around this level for gold prices,” he added.

Offering some respite, the dollar index fell 0.1% against its rivals, making gold less expensive for other currency holders. [US/]

According to the CME’s FedWatch Tool, the probability that the Fed will leave rates unchanged this year is at 88.5%. The Fed has since March 2022 raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.

High interest rates increase the opportunity cost of holding bullion.

Indicative of sentiment, holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to their lowest since January 2020 on Monday.

Elsewhere, spot silver was down 0.1% at $22.59 an ounce, platinum dropped 1.3% to $890.07, and palladium shed nearly 3% to $1,231.98.

(Reporting by Brijesh Patel and Sherin Varghese in Bengaluru; Editing by Bernadette Baum, Shilpi Majumdar and Sandra Maler)