Gold prices held firm near three-week highs on Wednesday as investors reevaluated expectations of further U.S. interest rate hikes in light of lackluster economic indicators. The market’s focus remains on upcoming data releases scheduled for this week.
At 0735 GMT, spot gold experienced a marginal decline of 0.1% to reach $1,934.84 per ounce, just $3 shy of its peak since August 7, attained on Tuesday. Simultaneously, U.S. gold futures edged down 0.1% to $1,963.10.
The backdrop for this sentiment shift includes U.S. Treasury yields sliding to three-week lows and the dollar weakening on Tuesday. The catalyst for these moves was the release of data showing a drop in job openings to their lowest point in almost 2.5 years for July. Additionally, consumer confidence fell more than anticipated in August.
In response, the appeal of non-interest-bearing assets like gold surged due to the prospect of lower interest rates. According to Matt Simpson, Senior Analyst at City Index, the trajectory of gold prices is contingent on the trajectory of the U.S. dollar and yields. If U.S. data continues to display weakness, it’s likely that gold prices will benefit from reduced expectations of another Federal Reserve rate hike.
However, Simpson cautioned that the potential risk lies in the possibility of a contradictory scenario, where strong U.S. GDP and non-farm payrolls data could swiftly reverse the gains made on Tuesday.
Investor attention is now geared towards upcoming economic releases. The Commerce Department’s revised April-June GDP figure is anticipated later in the day, followed by the PCE price index on Thursday and the non-farm payrolls report on Friday.
The Federal Reserve is anticipated to maintain its current stance at the upcoming meeting, with market odds indicating a 44% probability of a rate hike in the November meeting, as per the CME’s FedWatch Tool. This represents a slight decline from the 51% probability recorded a day earlier.
In related precious metals, spot silver experienced a 0.7% dip, reaching $24.57 per ounce but remaining close to a one-month high. Platinum steadied at $975.84, maintaining its elevation after reaching its highest point since July 19 on Tuesday. Palladium, however, witnessed a decline of 0.8%, sliding to $1,238.95.
