Weaker Dollar, Fed Easing Projections amid Still-High CPI, China’s Buying – All Push Gold Higher

A weaker U.S. dollar and growing awareness that U.S. interest rates have peaked or are very close to peaking continue to push gold prices higher. A new all-time high is within reach, which should give the precious metal a boost.

The dollar was under pressure as traders continued to price in rate cuts. The current fed funds rate is 475-500, having risen 25 basis points to 500-525 at the May FOMC meeting, and held there in June before starting rate cuts in July. Expected monetary easing by the Federal Reserve weighed on the dollar, especially against other currencies that are still in tightening mode. The euro is one such currency, and comments from the ECB continue to suggest the central bank will keep raising rates to offset inflation. The euro makes up nearly 58% of the dollar index – a basket of six currencies used to value the greenback – and with the ECB still in tightening mode, the greenback's value could ease further.

Meanwhile, the People’s Bank of China (PBOC) reported continuation of the piling up spree in the country’s gold reserves adding a jaw-dropping 18 tons in March, to be continued. China has consistently added to its gold reserves since November, purchasing more than 100 tons in the last 5 months. The second-largest economy in the world now has 2,068 tons in its coffers.