The recent spate of soft US economic data has raised investor speculation that the Federal Reserve may be reluctant to lift interest rates any time soon. Yesterday’s rally in the yellow metal was fuelled by a weaker than expected reading of manufacturing in the New York-area, which retreated in July from a two-year high. The US dollar subsequently fell to its lowest level in 10 months against a basket of major currencies following the report.
A weaker greenback is bullish for gold as the dollar-denominated commodity becomes less expensive for investors holding in other currencies. XAUUSD was last seen around the $1238 per ounce-mark. The medium-term trend has turned bullish after bullion climbed above the technically important 200-day moving average on Monday. A convincing close above $1240 per troy ounce could unlock further upside for prices.