Gold prices remained resilient above the crucial $2,000 threshold on Wednesday, supported by a weakened U.S. dollar and a decline in U.S. bond yields, fueled by growing expectations that the Federal Reserve has concluded its tightening cycle.
As of 0747 GMT, spot gold exhibited a 0.2% gain, reaching $2,001.90 per ounce, after reaching a three-week high of $2,007.29 in the previous session. Concurrently, U.S. gold futures inched 0.1% higher to $2,003.90.
City Index senior analyst Matt Simpson attributed the positive momentum in gold prices to “softer yields and the dollar,” emphasizing the impact of softer U.S. economic data that has accelerated the case for the Fed‘s potential first cut in 2024.
Simpson added a note of caution, stating, “the move lower in the U.S. dollar looks overextended,” expressing reservations about gold’s ability to sustain a full commitment above $2,000, particularly with a looming effective 4-day weekend in the U.S.
Despite a 0.1% increase in the dollar against its rivals, it maintained proximity to the more than 2-1/2-month low recorded on Tuesday. A weakened dollar, however, makes gold more affordable for holders of other currencies.
Minutes from the Federal Reserve’s October 31-November 1 meeting revealed that officials agreed to proceed “carefully,” considering interest rate hikes only if progress in controlling inflation wavered.
Tuesday’s data indicated a decline in U.S. existing home sales to the lowest level in over 13 years for October. Currently, markets are pricing in a nearly 60% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool. Lower interest rates tend to diminish the opportunity cost of holding gold.
In October, Swiss gold exports surged to their highest level since May, with a significant uptick in deliveries to India to meet demand during the country’s festive season, as revealed by customs data.
Simultaneously, spot silver saw a 0.3% increase to $23.81 per ounce, while platinum experienced a marginal 0.1% decline to $933.38. Palladium, however, slipped 1.1% to $1,067.03.
