Gold steadies near nine-month low as dollar rally powers forward

Gold steadied near the lowest in more than nine months as the dollar edged higher in anticipation of U.S. inflation data this week that’s set to shape the magnitude of the Federal Reserve’s next rate hike.

Investors concerned about the prospect of a global economic downturn have turned in droves to the greenback, which is already up more than 2% this month.

That’s capped gold, despite support from an easing in U.S. Treasury yields.

“Any significant or lasting rise in the gold price is being precluded not only by the firm U.S. dollar but also by the ongoing and robust ETF outflows,” Commerzbank AG analyst Carsten Fritsch said in a note.

“The gold ETFs tracked by Bloomberg registered outflows of 29 tons last week, their most pronounced in eight weeks and the fourth week in a row (with growing momentum).”

Gold has been on a roller-coaster this year as Russia’s invasion of Ukraine spurred a rally in the haven to well above $2,000 an ounce in March, only for the momentum to fade as the growth and inflation outlook shifted.

In recent weeks, investors have cut holdings in bullion-backed exchange-traded funds.

U.S. inflation figures this week may stiffen the resolve of Fed policymakers to proceed with another big increase in interest rates later this month.

Economists estimate the gauge climbed 8.8% in June from a year-earlier to a fresh four-decade high.

“If it’s a huge drop that would chop markets,” said Liberum Capital analyst Tom Price, “gold’s not moving much because the institutional dudes are just waiting for the next FOMC.”

Spot gold was down 0.2% at $1,729.79 an ounce at 10:52 a.m. in New York, after earlier falling to $1,723.32, the lowest intraday price since Sept. 30.

The Bloomberg Dollar Spot Index was little changed as spot silver, platinum and palladium retreated.