Gold tops $4,400 as dollar slides to three-week low

Gold climbed back above $4,400 per ounce on Wednesday as the U.S. dollar extended its losing streak to four consecutive sessions, with the Dollar Index falling to around 98.70 — its lowest level in three weeks. Spot gold rose roughly 1.2% on Wednesday to trade near $4,401, according to price data, before edging higher to around $4,413 in early Asian trading on Thursday.cnbc+1

The rally sets the stage for a pivotal 48 hours in markets, with U.S. Producer Price Index data due Thursday and Consumer Price Index figures on Friday — the final major economic releases before the Federal Reserve's September 15-16 policy meeting.fxstreet+1

A Weakening Dollar Fuels the Rally

The greenback's decline reflects a confluence of pressures. Fiscal concerns have intensified after total U.S. debt topped $40 trillion last month, undermining confidence in dollar-denominated assets. Gold is supported "as U.S. fiscal pressures continue to undermine confidence in the long-term value of government debt and the currency used to finance it," Daniel Hynes, senior commodities strategist at ANZ, said in a note.cnbc

Meanwhile, a sharp unwind of yen-funded carry trades has added to dollar weakness. The Japanese yen surged 4.5% in the past week to a seven-month high near 152.89 per dollar, according to Reuters, as traders position for a widely expected Bank of Japan rate hike on September 17-18. The yen rally paused slightly on Thursday, with the currency trading around 153.70.freemalaysiatoday+2

"For now, the geopolitical developments in the Persian Gulf are of secondary importance to gold. Gold instead is teeing off on a weaker dollar, which notably is not moving up despite the fact that U.S. rates are going higher," Marex analyst Edward Meir said.cnbc

Inflation Data to Shape the Fed's Path

Markets remain deeply divided over the Fed's next move. The CME FedWatch Tool shows roughly 60% odds of a rate hike at the September meeting, fueled by last Friday's stronger-than-expected jobs report. But a majority of economists in a Reuters poll expect the central bank to hold rates steady through year-end.fxstreet+2

Rising oil prices have complicated the picture. Brent crude surged above $100 a barrel on Wednesday after Iran and the United States engaged in the largest wave of attacks on shipping since their six-month-old conflict began, threatening further disruption to Middle Eastern energy supplies. The resulting energy-price shock sent benchmark 10-year Treasury yields to their highest levels since 2023.freemalaysiatoday+1

"We all feel like that's going to be reasonably consequential as to how quickly or not we might see an interest rate increase from the Federal Reserve," said Sally Auld, chief economist at National Australia Bank, referring to this week's inflation readings.freemalaysiatoday