In Asian trade on Thursday, gold prices experienced a slight uptick, maintaining a recent trading range amidst signals from the Federal Reserve indicating the possibility of higher-for-longer U.S. interest rates.
Bullion prices found some relief earlier in the week as the dollar retreated from three-month highs. However, further declines in the greenback were limited as Treasury yields remained near recent peaks.
Gold continued to trade predominantly within the $2,000 to $2,050 an ounce range established over the past month. While the potential for higher rates hindered significant upward movement in gold prices, concerns over deteriorating global economic conditions, particularly with Japan and the UK slipping into recession, tempered its downside.
Spot gold rose by 0.2% to $2,029.78 per ounce, while gold futures expiring in April increased by 0.3% to $2,039.55 per ounce by 00:13 ET (05:13 GMT).
The release of the Fed‘s late-January meeting minutes on Wednesday reiterated the central bank’s cautious stance towards initiating early interest rate cuts. This sentiment was echoed by various Fed officials throughout the week, citing concerns over persistent inflation and the robustness of the U.S. economy.
As a result, market expectations for rate cuts in March and May were significantly reduced, with traders now anticipating steady rates in June. According to the CME Fedwatch tool, there is a 53.6% chance of a 25 basis point cut in June, with a 28.7% probability of rates remaining unchanged, up from 19.7% seen the previous week.
The potential for prolonged higher rates poses challenges for gold as it increases the opportunity cost of investing in the precious metal. However, analysts at Goldman Sachs believe that gold stands to benefit from any interest rate cuts this year. Similarly, Citi analysts have forecasted the potential for gold prices to reach $3,000 per ounce by 2025.
In addition to gold, other precious metals also experienced gains on Thursday, albeit recovering from steep losses in the prior session. Platinum futures rose by 0.4% to $894.10 per ounce, while silver futures increased by 0.6% to $23.012 per ounce.
