Gold prices rose on Monday as the dollar fell, but central banks worldwide maintained aggressive monetary policies to combat rising inflation, restricting gains for safe-haven bullion. The dollar index went down 0.2%, making GOLD in US dollars less expensive for foreign buyers.

In early Asia, the gold price broke above a modest consolidation formed in the $1,660.20-1,663.32 range. The precious metal is approaching the crucial $1,680.00 as market participants anticipate a drop in the US ISM Manufacturing PMI data that will be released on Monday.

According to preliminary projections, the US ISM Manufacturing data will be released at 52.3, compared to the previous release of 52.8. The Federal Reserve (Fed) has accelerated interest rates to bring price stability to the economy, forcing corporations to abandon expansion and investment plans. As a result, manufacturing activity in the US economy is declining.

What’s worse for the US dollar index (DXY) is a big drop in the consensus for ISM Manufacturing New Orders Index data. The economic data is 49.6 compared to the previous report of 51.3. The economic indicator predicts future demand from enterprises to meet retail demand. A drop in the New Orders Index implies weak demand ahead, which may result from a sharp drop in household purchasing power due to mounting price pressures.

Despite the turbulence in global financial markets, Fed policymakers have been steadfast in raising interest rates. Fed Vice Chair Lael Brainard reiterated her support for the Federal Reserve’s higher-for-longer interest-rate strategy to combat inflation on Friday. Rising interest rates reduce the appeal of bullion by increasing the potential cost of holding the non-yielding asset.

Eurozone inflation surpassed projections to hit 10% in September, a new peak that will fuel anticipation for another big interest rate hike from the European Central Bank next month. Last week, the physical gold market in India shifted to a premium as demand increased ahead of the festive season, while Chinese premiums remained elevated.

Gold Technical Outlook

Gold price resumes its positive trading to move away from the $1,660 level, reinforcing expectations of the bullish trend continuing for the rest of the day. Gold is trading bullish, heading towards $1,686.40 as the next major aim, being aware that breaching it will extend the bullish wave to $1,708.55.

At the same time, gold is anticipated to rise until it remains below or fails to break above $1,660. Today’s trading range is likely between $1,645 support and $1,686 resistance.

Today’s projected trend: Bullish