By Anushree Ashish Mukherjee
(Reuters) – Gold prices firmed on Tuesday as U.S. dollar and Treasury yields slipped, while investors strapped in for U.S. economic data due this week that could provide more clarity on the Federal Reserve’s interest rate path.
Spot gold was up 0.7% at $2,041.79 per ounce as of 10:09 a.m. ET (1509 GMT). U.S. gold futures rose 0.7% to $2,055.70.
The gains were led by a 0.4% decline in the dollar index fell, while benchmark U.S. 10-year Treasury yields were hovering near their lowest levels since July. [USD/] [US/]
Investors are buying gold and there is less incentives for people to get rid of it, since the belief is that the Federal Reserve may very well cut interest rates before they achieve their 2% inflation target, said Bart Melek, head of commodity strategies at TD Securities.
Lower bond yields and interest rates reduce the opportunity cost of holding non-interest-bearing gold.
Fed Chair Jerome Powell last week said that the U.S. central bank’s monetary policy tightening is likely to be over, with discussion on cuts to borrowing costs moving “into view”.
However, some Fed officials have pushed back against the surging market expectations of rate cuts.
Markets are pricing in about a 70% chance of a rate cut in March, according to the CME FedWatch tool.
Traders are looking towards a slew of U.S. economic data this week, including the November core personal consumption expenditure (PCE) index report due on Friday, the Fed’s preferred measure of underlying inflation.
Presumably (it’s) still just a question of time before the Fed lowers its interest rates, so we see no reason for any significant downward correction of the gold price in the foreseeable future, Commerzbank said in a note.
Spot silver gained 1.4% to $24.10 per ounce, while platinum was up 1% at $954.49 and palladium climbed 3.5% to $1,224.81.
(Reporting by Anushree Mukherjee in Bengaluru; Editing by Shweta Agarwal)
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