Gold prices stabilized after reaching a six-month peak on Tuesday, with the market anticipating an extended pause in the U.S. Federal Reserve’s interest rate hike cycle. The restrained movement in the dollar and subdued bond yields contributed to gold’s resilience.
At 0412 GMT, spot gold showed marginal change at $2,014.12 per ounce, having earlier touched its highest level since May 16. December delivery U.S. gold futures inched up by 0.1% to $2,014.20 per ounce.
City Index senior analyst Matt Simpson noted, “Lower bond yields and bets the Fed may cut sooner than originally thought have certainly helped gold shine.”
The dollar index (.DXY) touched its lowest point since late August against major currencies, making gold more attractive for holders of other currencies. Additionally, 10-year Treasury note yields hovered close to two-month lows at 4.3630%.
Expectations of a potential shift in the Fed’s monetary stance intensified following recent data indicating a slowdown in U.S. inflation. The market is now awaiting the release of Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge, on Thursday.
Simpson emphasized the critical factor as whether inflation softens quickly enough to justify expectations of rate cuts. He added, “If so, I’d look for evidence of support around 1,990 or 1,960 as there was a lot of trading activity in that area.”
Traders widely anticipate that the U.S. central bank will maintain rates in December, with around a 50-50 chance of easing in May next year, according to CME’s FedWatch Tool.
Lower interest rates diminish the opportunity cost of holding non-interest-bearing assets like gold.
Investor focus also remains on the revised U.S. third-quarter GDP figures scheduled for Wednesday. Meanwhile, recent data revealed a second consecutive monthly decline in net gold imports into China via Hong Kong, reflecting subdued demand in the primary bullion market due to a patchy economic recovery.
In the broader metals market, spot silver dipped by 0.3% to $24.55 per ounce, platinum fell 0.5% to $913.90, and palladium declined by 0.8% to $1,061.41 per ounce.
