Gold benefits from US dollar’s slide ahead of CPI data

Gold prices steadied on Monday near a three-week peak hit in the previous session, buoyed by a weaker dollar, while investors looked forward to U.S. inflation data later this week that could influence the size of Federal Reserve rate-hike.

At the time of writing, the precious metal is trading at $1676.25. Gold was little changed at $1,676.24 per ounce by 1:50 p.m. ET (1850 GMT), after rising more than 3% to its highest since Oct. 13 at $1,681.69 on Friday. Gold futures have bounced up from $1,665 on Monday’s early European session appreciating on the back of US dollar weakness in a risk-on session, although it seems unable to find acceptance above $1,680 so far.

Precious metals have opened the week on a moderately bid tone, favored by a positive mood. Market rumors pointing out to a review of COVID-19 restrictions in China have improved investors’ sentiment on Monday, curbing demand for the safe-haven USD.

Some weakness in the dollar, yields are ticking down slightly and that is what helps the precious metal. The US dollar extended losses to a more than one-week low, making gold more attractive for other currency holders.

Data on Friday showed U.S. employers hired more workers than expected in October, but a rise in the unemployment rate to 3.7% raised hopes that the U.S. central bank would be less aggressive on rate hikes going forward.

If Fed’s policymakers ae to decide to pause or they start to slow down on rate hiking, gold will benefit and that is what markets saw late last week and once more ahead of CPI data release. The US consumer price index report is due on Thursday. Traders are now pricing in 67% odds of a 50-basis point rate hike at the Fed’s meeting in December.

Tuesday will be a big day with regard to the ongoing US midterm elections, which will determine control of Congress and could trigger price action and market moves that influence all financial assets. Gold prices are holding Friday’s strong gains that included a technically bullish weekly high close that is one chart clue that a market bottom is in place.

Silver fell 0.1% to $20.81 per ounce, platinum rose 1.8% to $977.96, while palladium was up 1.6% to $1,891.39. The Silver price fluctuates in the North American session due to risk appetite improvement after last Friday’s US employment data showed that the economy continues to add jobs, though the Unemployment Rate jumped, signs that the Federal Reserve’s policy is beginning to impact the “tight” labor market. That, alongside uncertainty on US midterm elections and inflation data to be released, keeps the American Dollar on the defensive front. At the time of writing, the XAGUSD is trading at $20.82, below its opening price by 0.11%.