Gold prices climbed back above the $2,000 level on Tuesday, buoyed by a weaker dollar, while investors looked for more clarity on the U.S. Federal Reserve’s rate hike path.
Spot gold crossed the $2000 mark and was up 0.5% at $2,003.82 per ounce by mid-day, after hitting a two-week low of $1,981.19 in the previous session. U.S. gold futures were also up 0.5% at $2,016.60.
Meanwhile, Gold’s near-10% year-to-date climb has been largely predicated on its role as a safe haven as markets kept a wary eye over recession and financial instability risks.
However, bids for a fresh record high may be curtailed until there is greater certainty to Fed rate cuts later this year.
Meanwhile, markets are pricing in an 83.5% chance of a 25-basis-point hike in May, followed by increased expectations of a pause later in the year.
Gold is considered a hedge against inflation and economic uncertainties, but higher interest rates dim the non-yielding bullion’s appeal.
With the majority of U.S. data over the past few days pointing to an economic slowdown and a weakening dollar, the background influences remain supportive for gold.
Focus will now be on comments from Fed officials this week before they enter a blackout period from April 22, ahead of the central bank’s May 2-3 meeting.
Gold will remain supported if investors remain of the view that the scarring from the banking crisis will lead to tighter credit conditions.
The dollar edged lower, making bullion cheaper for overseas buyers.
Spot silver was flat at $25.10 per ounce, platinum gained 2.6% to $1,075.62, while palladium shot up 3.5% to $1,614.87.
Gold Price Decline, Pressured By Strong Dollar
On Monday, Gold extended its decline, pressured by a stronger dollar and higher Treasury yields, while investors look for cues on whether a ‘one and done’ rate hike will be announced by the Federal Reserve in May.
Spot gold was down 1.0% at $1,984.26 per ounce, after rising as much as 0.6% earlier in the session. US gold futures fell 0.7% to trade at $2,001 per ounce in New York.
Meanwhile, the US dollar gained 0.6%, making greenback-priced bullion less attractive for overseas buyers. US benchmark Treasury yields also climbed to a more than two-week high.
Some analysts were of the view that a stronger US dollar and the rise in bond yields, along with some profit-taking from recent gains, were putting pressure on gold.
Gold also dropped 2% on Friday after the dollar bounced, with Fed Governor Christopher Waller and Atlanta Fed President Raphael Bostic suggesting the Fed could hike rates by another 25 basis points next month.
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