Gold extends recovery from three-week trough as dollar stalls

Gold prices rose in European trade on Friday away from three-week lows and away from the barrier of $1,900, as the dollar stalls against major rivals.

Prices are also boosted as global central banks prepare to end the current cycle of policy tightening, with the European Central Bank hinting at ending interest rate hikes this week.

Gold Prices Today

Gold prices rose 0.5% to $1,919 an ounce, with a session-low at $1,909, after rising 0.2% on Thursday, the first profit in three days, away from a three-week low at $1,901. 

The Dollar

The dollar index fell 0.2% on Friday, on track for the first loss in four sessions off six-month highs at 105.43 against a basket of major rivals.

The dollar fell as well ahead of crucial US industrial production data for August, in addition to inflation forecasts and consumer confidence data. 

Strong Data

Recent US data showed retail sales rose unexpectedly in August, while producer prices rose past estimates in August, as unemployment claims were below estimates last week.

Such data bolstered the case for another US interest rate hike later this week as the US economy proves resilient. 

US Rates

Following the data, pricing for a US interest rate hike in September stood at 7%.

Odds for a 0.25% Federal Reserve interest rate hike in November fell to 41% to 36%.

ECB

Unexpectedly, the European Central Bank raised interest rates for the tenth meeting in a row, carrying on its battle against inflation.

The ECB raised interest rates by 25 basis points to 4.50%, the highest since 2001.

ECB President Christine Lagarde said that ECB members believes the current rates will help control inflation and bring it back to 2%.

The ECB will continue to rely on data to determine the duration of the currently high interest rates.

As central banks in Canada, Australia, and New Zealand pause interest rate hikes, it's now likely the global monetary policies will stall and taper out from the recent policy tightening frenzy. 

The SPDR

Gold holdings at the SPDR Gold Trust fell 879.7 tonnes yesterday to a total of 879.7 tonnes, the lowest since January 2020.