Gold prices increased on Tuesday, defying the impact of a stronger dollar and elevated Treasury yields. Investors held their positions as they awaited the release of the latest U.S. Federal Reserve policy meeting minutes for insights into the timing of potential interest rate cuts.
Spot gold witnessed a 0.37 percent increase recording $2,024.75 per ounce as of 010:18 GMT. Meanwhile, U.S. gold futures saw a 0.58 percent increase at $2,035.9 per ounce.
In Dubai, 24-carat gold was priced at AED 245.00 per gram, while 22-carat stood at AED 227.00 per gram.
Treasury yields
Despite a 0.1 percent increase in the dollar index and benchmark 10-year Treasury notes nearing 4 percent levels, gold prices remained resilient. The appreciation of the dollar and rising Treasury yields typically make gold less attractive to overseas buyers, decreasing its prices.
Analysts stated that the volatility in the market was due to the long weekend in the U.S. and the absence of significant news. They suggested that the upcoming release of the Federal Open Market Committee (FOMC) minutes might not provide substantial insights, given recent inflation data releases and vocal statements from Federal Reserve members.
Market expectations
Despite progress in U.S. inflation, Federal Reserve officials emphasized the need for continued efforts to ensure price stability. However, they cautioned against delaying rate cuts for too long. Last week’s hotter-than-expected U.S. consumer and producer prices data tempered expectations for a rate cut in March, supporting the upward trajectory of gold prices.
According to the CME Fed Watch Tool, markets are currently pricing a 75 percent chance of a rate cut in June, reflecting the evolving sentiment amidst economic data releases and Fed communications. Lower interest rates typically decrease the opportunity cost of holding gold leading to a decrease in prices.
Read: Oil prices decline following Chinese economic data release
Other precious metals
Spot platinum fell by 0.6 percent to $893.16 per ounce, palladium declined by 0.8 percent to $946.41, and silver also dropped by 0.4 percent to $22.93 per ounce, reflecting mixed movements across the precious metals sector.
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