Gold prices exhibited a flat-to-low performance on Wednesday, continuing their recent trend of subdued movements. The market sentiment was characterized by unease over the prospect of sustained higher US interest rates, with key economic indicators looming on the horizon.
The yellow metal remained firmly within the $2,000 to $2,050 trading range established over the past month. The Federal Reserve’s consistent messages that it has no immediate plans to commence rate cuts in early 2024 restrained any significant upward movement in gold. The strength of the US dollar, hovering near three-month highs, further exerted pressure on gold prices.
Nevertheless, gold retained its position above the crucial support level of $2,000 per ounce. This suggests that concerns about a potential global economic slowdown and geopolitical tensions in Russia and the Middle East continued to drive some safe-haven demand for the precious metal.
As of 00:20 ET (05:20 GMT), spot gold steadied at $2,030.69 per ounce, while April gold futures dipped 0.2% to $2,039.45 per ounce.
Market participants are eagerly awaiting key economic data, including the Personal Consumption Expenditures (PCE) price index, the Fed‘s preferred inflation gauge, scheduled for release on Thursday. The data is anticipated to indicate persistent inflation in January, providing the Fed with grounds to maintain higher interest rates for an extended period.
Several Fed officials reiterated this week that sticky inflation would deter the Fed from implementing early interest rate cuts in 2024. Ahead of the inflation data, a second reading on fourth-quarter GDP, expected to reveal a slight cooling in economic growth, is due later on Wednesday.
Although the US economy is projected to outpace its developed world counterparts, the prospect of sustained higher interest rates poses increased pressure on gold. The opportunity cost of purchasing bullion rises with higher rates. Other precious metals also experienced a retreat, with platinum futures declining 0.5% to $892.05 per ounce, and silver futures falling 0.7% to $22.602 per ounce on Wednesday.
