Softer dollar supports gold as traders await Fed focus turns to Fed minutes

Bengaluru — Gold prices rose on Tuesday, supported by a weaker dollar and treasury yields as investors look forward to minutes from the Federal Reserve’s latest meeting for more guidance on its interest rate outlook.

Spot gold was up 0.6% at $1,988.29/oz, at 1.33am GMT. US gold futures gained 0.5% to $1,990.10.

“The dollar and the US bond yields continue to come down. Demand from central banks is also quite strong. All these are bullish for gold. The market is reconsidering that drop we saw yesterday,” said Edward Meir, a metals analyst who provides research for Marex.

The dollar languished near more than a two-and-a-half-month low as investors expect US interest rates to fall in 2024. A weaker dollar makes gold less expensive for other currency holders.

Benchmark US 10-year treasury yields were hovering near two-month lows touched last week.

Minutes from the Fed’s latest meeting are due at 7pm GMT. Signs of slowing inflation in the US has boosted the expectation that the US central bank was finished with interest rates.

Markets are widely expecting the Fed to leave rates unchanged in the December meeting and currently pricing in a greater than 50% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool.

Lower interest rates decrease the opportunity cost of holding gold.

“I think the minutes will be a non-event.... There was not going to be any mention of cuts, Jerome Powell made that very clear in his news conference. It’s just the market that's expecting cuts from the Fed,” Meir said.

Inflation is likely to remain “stubborn” and force the Fed to keep interest rates elevated for longer than investors anticipate, Richmond Fed president Thomas Barkin said.

Spot silver rose 1% to $23.64/oz, platinum was flat at $918.59, while palladium eased 0.2% to $1,076.26.

Reuters