Gold Sees Some Relief as Dollar Retreats From 20-Year Highs

By Ambar Warrick 

Investing.com-- Gold prices recovered slightly on Tuesday, taking some relief as the dollar retreated from a 20-year peak, although hawkish signals from the Federal Reserve still weighed on the market.

Spot gold rose 0.1% to $1,738.55 an ounce, while gold futures broke above $1,750 an ounce with a similar gain by 21:07 ET (01:07 GMT). 

Slight weakness in the greenback helped bullion prices gain on Monday. The dollar retreated against the euro on expectations that the European Central Bank will tighten monetary policy more aggressively than initially thought. 

But the outlook for the yellow metal is severely depressed by the prospect of higher U.S. interest rates.

Gold slumped last week after the Fed signaled it has no plans to ease on its path of monetary tightening. The move pushed the dollar to a 20-year peak, and also drove up short-term Treasury yields. 

Metal markets are now looking at upcoming U.S. payrolls data this week. Strength in the jobs market is likely to give the Fed much more room to hike interest rates aggressively. 

After the Fed's comments on Friday, markets are pricing in a greater chance of a 75 basis point hike by the central bank in September. 

Despite weakness in stock and currency markets, gold has seen limited inflows as a safe haven. But this could change if the economic outlook worsens. 

“If equities remain in risk aversion mode as the speculative money that bought risky assets this month grows nervous that economic growth is about to collapse, gold might be able to stabilize here,” analysts at Oanda wrote in a note. 

Among industrial metals, copper prices recovered on Tuesday, taking support from some weakness in the dollar. 

Copper futures rose 0.3% to $3.6108 a pound. But prices of the red metal are trading well below their 2022 peaks, due to weakness in China, copper’s largest importer.

Focus is now on Chinese manufacturing activity data on Wednesday for more cues on copper demand.