In a noteworthy ascent, gold prices edged higher on Thursday, approaching the pivotal $2,000 per ounce mark, fueled by a weakened U.S. dollar and diminished Treasury yields, prompting increased demand for the precious metal.
As of 0747 GMT, spot gold exhibited a 0.4% increase, reaching $1,996.84 per ounce, following a notable upswing to a three-week high of $2,007.29 on Tuesday. Concurrently, U.S. gold futures experienced a 0.3% gain, reaching $1,998.20.
Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, attributed the surge to the prevailing anticipation of a decisive shift towards the peak of the interest rate hike cycle. Wong commented, “The anticipation of this effective pivot towards interest rate hike cycle peak is translating to ongoing softness in the U.S. dollar and the longer-dated U.S. yield which will support gold prices, at least in the short term.”
The U.S. dollar, measured by the (.DXY) index, registered a 0.2% decline against its counterparts, reversing gains from the preceding two sessions. This depreciation rendered gold more affordable for holders of other currencies. Simultaneously, the benchmark U.S. 10-year Treasury yields experienced a descent to a two-month low on Wednesday.
Although the number of Americans filing new unemployment claims declined more than anticipated last week, concerns persist regarding the deceleration of the labor market amid increasing interest rates.
Market analysts widely anticipate the U.S. Federal Reserve to maintain unchanged interest rates in December. However, expectations for rate cuts in 2024 were tempered after the release of jobless claims data, according to CME’s FedWatch Tool. Lower interest rates, a consequence of this decision, reduce the opportunity cost of holding gold.
Minutes from the Fed‘s Oct. 31-Nov. 1 policy meeting revealed that officials agreed to proceed “carefully” and only consider raising interest rates if progress in controlling inflation faltered.
In parallel, a survey released on Wednesday indicated that U.S. consumers’ inflation expectations rose for the second consecutive month in November.
Looking ahead, there is a possibility that spot gold may revisit its Nov. 21 high of $2,007.29 per ounce, as it appears to have completed a correction from this level.
Other precious metals mirrored the positive trend, with spot silver rising 0.4% to $23.70 per ounce, platinum climbing 0.4% to $926.11, and palladium maintaining stability at $1,057.96.
