Gold Prices Rise on Expectations of U.S. Rate Cuts
Gold prices edged up on Thursday, following a significant increase in the previous session, as the dollar and bond yields weakened amid growing expectations of rate cuts by the U.S. Federal Reserve as early as September.
Spot gold rose 0.1% to $2,388.10 per ounce, after surging over 1% to its highest level since April 19 on Wednesday. U.S. gold futures also rose 0.1% to $2,393.20.
Impact of Weak Dollar and Bond Yields
The weakening of the dollar by 0.2% against a basket of major currencies has made gold more attractive to holders of other currencies, as it is priced in greenbacks. Additionally, the benchmark 10-year Treasury yield dropped to its lowest level in over a month.
Chief market analyst Tim Waterer noted that the latest consumer price index data has increased the likelihood of a rate cut in September, supporting gold prices from a yield perspective. He also mentioned that any potential rebound in the dollar or treasury yields could pose a challenge for gold prices in the coming days.
Outlook on U.S. Economic Indicators
The recent cooling of U.S. consumer prices, along with underwhelming job and payrolls reports for April, is seen as positive news for Fed policymakers who are looking for signs of progress on inflation before considering rate adjustments.
While gold is typically considered a hedge against inflation, higher interest rates can increase the opportunity cost of holding non-interest-bearing assets like gold.
Comments from Fed Officials
Chicago Federal Reserve Bank President Austan Goolsbee expressed optimism about declining inflation rates and echoed Fed Chair Jerome Powell’s remarks that another interest rate hike is unlikely.
Spot silver declined 0.5% to $29.56 per ounce, while palladium rose 0.3% to $1,012.93. Platinum also saw an increase of 0.7% to $1,071.00, reaching its highest level since May 22 last year.
(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Janane Venkatraman)
By adding additional context on the impact of weak dollar and bond yields, the outlook on U.S. economic indicators, and comments from Fed officials, readers gain a deeper understanding of the factors influencing gold prices. The insights provide a more comprehensive view of the market dynamics and potential challenges faced by gold prices in the near future.
