Gold flirts with seven-month high

Bengaluru — Gold prices touched a nearly seven-month high on Wednesday propelled by an extended decline in the dollar and bond yields as investors grew confident that the Federal Reserve is likely to cut rates by mid-2024.

Spot gold rose 0.2% to $2,044.53/oz by 4.53am GMT after hitting its highest since May 5. US gold futures for December delivery rose 0.3% to $2,045.40/oz.

“Gold is driven by an increasing market expectation of a Fed pivot from a hawkish tilt to a dovish tilt in the first half of next year — earlier than it did before,” said Kelvin Wong, senior market analyst for Asia Pacific at Oanda.

“The key point data to look for is the PCE [personal consumption expenditures] data and markets are expecting another slowdown in inflationary pressure in US,” said Wong.

Fed governor Christopher Waller — a known hawkish and influential voice at the central bank — on Tuesday flagged a possible rate cut in the months ahead, feeding market expectation that US rates have peaked.

Traders are now pricing in a more than 70% chance of rates easing in May 2024, compared with a 50% chance on Tuesday, CME’s FedWatch Tool shows.

Lower interest rates reduce the opportunity cost of holding non-interest-bearing bullion.

Investors’ attention is now on the revised US third-quarter GDP figures, due at 1.30pm GMT and on key PCE data — the Fed’s preferred inflation gauge — on Thursday.

Making gold less expensive for other currency holders, the dollar index slid to a more than three-month low against its rivals, and was poised to mark its worst monthly performance in a year. Meanwhile, yields on 10-year treasury notes fell to an over two-month lows of 4.2860%.

According to Reuters technical analyst Wang Tao, spot gold may extend gains into a range of $2,059/oz-$2,069/oz. Spot silver fell 0.2% to $24.96/oz, platinum was down 0.3% to $937.41. Palladium was steady at $1,054.75/oz.

Reuters