Gold climbed about 1% on Monday, trading above $4,650 an ounce and reaching its highest level since mid-May as weakness in the U.S. dollar continued to support demand for the precious metal.
The advance extends a powerful rally from last week, when bullion gained more than 5%. The move accelerated after the U.S. Treasury announced an expanded bond-buyback program, contributing to a decline in the dollar and increasing gold’s appeal to buyers using other currencies.
PCE and Jackson Hole Move Into Focus
Investors are now turning their attention to two major U.S. events that could determine the next direction for gold.
The July Personal Consumption Expenditures price index, the Federal Reserve’s preferred inflation gauge, is due Wednesday. Federal Reserve Chair Kevin Warsh is then scheduled to speak Friday at the Jackson Hole economic symposium.
Markets will be looking for indications of whether inflation conditions warrant another increase in U.S. interest rates. Current market pricing suggests investors see a greater probability of rates remaining unchanged in September than of an increase. Reuters reported Monday that markets were pricing roughly a 36% probability of a hike and 64% chance of no change.
The interest-rate outlook is particularly important for bullion because gold does not generate interest, making higher yields on bonds and other assets potentially less favorable for the metal.
Geopolitical Risks Remain in the Background
Geopolitical developments are also contributing to market uncertainty as Washington prepares additional economic measures targeting Iran and countries that maintain commercial relationships with Tehran.
