On Tuesday, gold prices surged to their highest levels in more than two weeks, benefiting from a weakened U.S. dollar and lower Treasury yields. Investors are eagerly awaiting the minutes from the Federal Reserve’s latest meeting for insights into the central bank’s interest rate outlook.
As of 0713 GMT, spot gold rose by 0.7% to $1,991.37 per ounce, while U.S. gold futures gained 0.7% to $1,993.50.
Edward Meir, a metals analyst providing research for Marex, noted, “The dollar and the U.S. bond yields continue to come down. Demand from central banks is also quite strong. All these are bullish for gold. The market is reconsidering that drop we saw yesterday.”
The U.S. dollar hit a 2.5-month low as investors anticipate a decrease in U.S. interest rates next year. A weaker dollar makes gold more affordable for holders of other currencies. Benchmark U.S. 10-year Treasury yields hovered near two-month lows reached the previous week.
Investors are closely watching the minutes from the Fed‘s latest meeting, scheduled for release at 1900 GMT, seeking clues on the central bank’s stance amid signs of slowing inflation in the United States. Expectations are widespread that the Fed will maintain rates in the December meeting, with a greater than 50% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool. Lower interest rates reduce the opportunity cost of holding gold.
Fitch Solutions analysis unit BMI stated in a note, “We believe the main factors buoying gold in 2024 will be interest rate cuts by the U.S. Fed, a weaker U.S. dollar, and high levels of geopolitical tension.”
Spot gold may revisit its October 27 high of $2,009.29 per ounce, having surpassed a resistance level at $1,991.
In addition to gold, other precious metals also experienced movements, with spot silver rising by 1.3% to $23.70 per ounce, platinum gaining 0.4% to $922.16, and palladium easing 0.2% to $1,075.88.
