Gold prices surged to a two-week high on Thursday as the U.S. dollar and Treasury yields stumbled, setting the stage for an eagerly anticipated U.S. inflation report that could shed light on the Federal Reserve’s cautious stance on interest rates.
At 0712 GMT, spot gold recorded a 0.3% increase, reaching $1,880.00 per ounce, marking its highest level since September 27. Simultaneously, U.S. gold futures saw a 0.3% uptick, climbing to $1,893.70.
The persistent weakness in the dollar index and U.S. Treasury yields, which hovered near two-week lows, bolstered the attractiveness of non-interest-bearing gold as an investment option.
The minutes from the Fed‘s September meeting revealed mounting uncertainty regarding the U.S. economic trajectory, prompting policymakers to adopt a more cautious stance. This sentiment was reaffirmed by top Fed officials in a series of statements this week.
Brian Lan, the Managing Director at Singapore dealer GoldSilver Central, remarked, “We are almost at the end of interest rate hikes and there could probably be a last one of 25 basis points, which would not have a significant impact on the market because this is largely expected. But one thing for sure is that people would be expecting interest rates will still continue to remain high … so precious metals prices will remain (broadly) subdued.”
The persistently high interest rates have increased the opportunity cost of holding non-yielding gold. Despite gold being down over 9% from its near-record highs in May, investors still perceive a 26% chance of a rate hike at the Fed’s December meeting.
The eagerly awaited consumer price index (CPI) data, expected to indicate moderated inflation in the previous month, is scheduled for release later today. This follows Wednesday’s data that revealed U.S. producer prices exceeded expectations in September, though underlying inflation pressures at the factory gate continued to ease.
In other precious metal news, spot silver saw a 0.5% increase, reaching $22.15 per ounce. Platinum advanced by 0.9% to $892.75, and palladium gained 0.5% to $1,173.10.
