On Wednesday, the price of gold dipped below the significant $2,000 threshold, influenced by the stabilization of the U.S. dollar following its recent decline. Nevertheless, the anticipation that the U.S. Federal Reserve has concluded its tightening cycle provided support to bullion prices.
As of 0335 GMT, spot gold experienced a 0.1% decrease, settling at $1,996.33 per ounce, after reaching a three-week high of $2,007.29 in the previous session. Concurrently, U.S. gold futures saw a 0.2% decline, reaching $1,998.10.
The favorable impact of softer yields and a weakened dollar on gold prices has been evident, attributed to subdued U.S. economic data that has accelerated expectations for the Fed’s first rate cut in 2024, according to City Index senior analyst Matt Simpson.
Despite these factors, Simpson noted, “the move lower in the U.S. dollar looks overextended,” and with an impending four-day weekend in the U.S., gold currently lacks the momentum to firmly breach the $2,000 mark.
The U.S. dollar maintained stability against its counterparts, rebounding from a more than 2-1/2-month low in the preceding session, while benchmark U.S. 10-year Treasury yields lingered near two-month lows. A weakened dollar tends to make gold more affordable for holders of other currencies.
The minutes of the Federal Reserve’s October 31 to November 1 policy meeting revealed a cautious approach, indicating that officials would proceed “carefully” and consider raising interest rates only if progress in controlling inflation faltered.
Recent data disclosed a decline in U.S. existing home sales to the lowest level in over 13 years for October. Presently, markets are pricing in a nearly 60% chance of a rate cut of at least 25 basis points by May, as indicated by CME’s FedWatch Tool. Lower interest rates typically reduce the opportunity cost of holding gold.
Customs data showed that Swiss gold exports in October surged to their highest level since May, primarily driven by increased deliveries to India to meet demand during the country’s festive season.
In the broader precious metals market, spot silver recorded a modest 0.1% increase, reaching $23.75 per ounce, while platinum remained stable at $933.98. On the other hand, palladium experienced a 1.2% decline, settling at $1,065.24.
