FX.co ★ Gold Rises as Dollar Weakens

Gold rose to about $4,400 an ounce on Wednesday, snapping a two-session decline as a weaker dollar made the dollar-denominated metal more attractive to holders of other currencies. The dollar’s slide has been driven largely by the sharp appreciation of the Japanese yen this month, as well as cautious positioning by investors ahead of several major central bank meetings.

The US Federal Reserve, the European Central Bank, and the Bank of Japan are all expected to raise interest rates this month. Market participants are also awaiting key US inflation figures due this week for further guidance on the Fed’s policy trajectory.

At the same time, oil prices continued to climb amid rising tensions in the Middle East, stoking inflation concerns and reinforcing expectations for additional rate hikes. Although gold is traditionally seen as an inflation hedge, higher interest rates tend to dampen demand for the non-yielding asset by increasing the appeal of interest-bearing alternatives.