Gold prices extended their gains to reach a two-week high on Thursday as the U.S. dollar and Treasury yields dipped, reflecting the Federal Reserve’s cautious tone ahead of a pivotal U.S. inflation report expected to provide further clues about future interest rates.
At 1138 GMT, spot gold marked a 0.5% increase, rising to $1,882.59 per ounce, its highest level since September 27. Meanwhile, U.S. gold futures also advanced by 0.4% to reach $1,895.40.
The appreciation in gold prices can be attributed to declining yields, a more dovish stance from select Fed members, and a growing interest in safe-haven assets. Michael Hewson, Chief Market Analyst at CMC Markets, stated, “Bias remains for further modest gains towards $1,900 an ounce, with support at $1,840.”
The minutes from the Fed’s September meeting highlighted increased uncertainty regarding the trajectory of the U.S. economy, prompting policymakers to adopt a newly cautious position. This sentiment has been consistently reinforced by top Fed officials in their statements throughout the week.
Gold benefited from the weakened U.S. dollar index and subdued U.S. Treasury yields, which remained near two-week lows.
Investors are now turning their attention to the U.S. Consumer Price Index (CPI) report scheduled for release at 1230 GMT, which is anticipated to show moderated inflation for the previous month. Wednesday’s data indicated that U.S. producer prices exceeded expectations in September, though underlying inflation pressures at the factory gate continued to ease.
Michael Hewson further commented, “If CPI comes in hotter than expected, it may put the prospect of a November rate hike back on the table.”
Elevated interest rates have increased the opportunity cost of holding gold, which remains down more than 9% after surpassing the key level of $2,000 per ounce in May.
According to the CME Fedwatch tool, traders currently estimate a 72% chance of the Fed maintaining interest rates unchanged for the remainder of the year.
In the wider precious metals market, spot silver witnessed a 0.5% increase, reaching $22.16 per ounce, while platinum saw a 0.5% decline, slipping to $880.99. Palladium also slipped by 0.4% to $1,162.15.
