Gold prices edged higher on Tuesday, buoyed by a subdued dollar after soft US economic data raised hopes that Federal Reserve could begin to slow monetary policy tightening later in the year.

Spot gold rose 0.2% to $1,651.85 per ounce, as of 0431 GMT, while US gold futures inched 0.1% higher to $1,655.70.

The dollar index was flat on the day, hovering close to Friday’s low amid bets on less hawkish Fed and firmer sterling after Rishi Sunak was set to become Britain’s next prime minister.

The market is sensing that the US Fed is getting towards the end of the aggressive part of the rate hike cycle and maybe prepared to take a wait-and-look stance, said Stephen Innes, managing partner at SPI Asset Management.

“Once the US yields and dollar start to turn significantly low, that should be very positive for gold.”

Gold jumps on Fed rate path doubts as dollar flips down

An S&P Global survey showed US business activity contracted for a fourth straight month in October, the latest evidence of an economy softening in the face of high inflation and rising interest rates.

While the US central bank appears set to deliver another 75-basis-point interest rate hike at its next policy meet, policymakers are seen debating the size of future increases.

A majority of economists polled by Reuters forecast a 50 basis point hike in December.

Although gold is considered a hedge against inflation, higher interest rates increase the opportunity cost of holding the zero-yield bullion, while boosting the dollar and bond yields.

Spot gold may break a support at $1,644 per ounce and drop into a range of $1,625-$1,633, according to Reuters technical analyst Wang Tao.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 0.29 tonnes to 928.39 tonnes on Monday, their first inflow after six straight days of declines.

Spot silver was steady $19.27 per ounce, platinum eased 0.2% to $923.36 and palladium rose 1.1% to $1,989.32.