Gold saw modest gains on Wednesday, driven by a weakening dollar, as investors eagerly anticipated a barrage of economic data releases in the United States.
These data releases are expected to provide more insight into the Federal Reserve’s plans regarding interest rate cuts.
By 12:50 GMT, the price of spot gold had inched up by 0.2%, reaching $2,032.88 per ounce.
Meanwhile, U.S. gold futures posted a 0.42% increase, reaching $2,034.30.
The U.S. dollar experienced a 0.5% decline against its major counterparts, following its recent peak on December 13.
Simultaneously, the benchmark 10-year Treasury yield, while slightly lower, still held above the 4% mark.
Craig Erlam, a senior markets analyst at OANDA, noted, “I think gold holding above that kind of psychological threshold of $2,000 is a sign of traders’ ongoing belief that rate cuts are coming soon and they will be quite aggressive when they do start.”
Market participants are currently placing their attention on key upcoming economic indicators, including the U.S. flash PMI survey scheduled for 1445 GMT, fourth-quarter advance GDP estimates to be released on Thursday, and personal consumption expenditure data on Friday.
Erlam suggested, “If the PCE data on Friday is higher, I wouldn’t be surprised if gold breaks the $2,000 range. If the data is in line or lower, then gold could maintain its position above $2,000 for a little longer.”
However, a robust U.S. economy and resistance from central bank officials are causing some investors to reconsider their expectations regarding the timing of Fed rate cuts this year.
According to the CME’s FedWatch Tool, market expectations are leaning towards the U.S. central bank keeping interest rates steady at its policy meeting on January 30-31, leading to a postponement of the anticipated interest rate cut.
Lower interest rates tend to reduce the opportunity cost associated with holding non-yielding assets like gold.
In addition to gold, other precious metals also saw positive movement.
Spot silver recorded a 1.5% increase, reaching $22.77 per ounce, platinum experienced a 1% gain, reaching $908.91, and palladium rose by 1.7% to $963.64.