Gold Price News: Gold Bounces Back As US Dollar Falls

Gold prices edged higher to reclaim the $2,350 an ounce mark on Tuesday, after the US dollar fell to a one-month low.

Prices rose as high as $2,356 an ounce on Tuesday, compared with around $2,338 an ounce in late trades on Monday.

The US dollar on Tuesday fell to its lowest level against the Euro since April 10, which is bullish for dollar-denominated gold prices as it makes the yellow metal cheaper for buyers in other currencies.

In addition, the markets were digesting the implications of the latest economic data from the US.

US producer price inflation rose by 0.5% in April, according to figures released Tuesday, well above market expectations of a 0.3% gain. That followed a downwardly-revised fall of 0.1% in March.

Signs of higher inflation strengthen the case for central banks to maintain higher interest rates, and this would normally weaken gold as it strengthens the dollar and raises the opportunity cost of holding non-interest-bearing assets. However, persistent inflation can encourage investors to transfer wealth into safe haven assets like gold, as a protection against the loss of a currency’s purchasing power.

The latest figures came hot on the heels of US consumer sentiment figures released last Friday showing that economic sentiment fell to a six-month low in May, as well as US initial jobless claims numbers released Thursday which came in well above market expectations, further contributing to the appeal of hard assets.

The markets will be watching closely for further signals, with US inflation figures for April due for release on Wednesday, along with retail sales figures for April.