The prices of gold increased on Tuesday due to the weakened dollar and treasuries. Additionally, the investor’s perspective on future Fed interest rates was taken into consideration.
At spot prices, spot gold went up 0.6% to $1,988.29 per ounce by 0133GMT. U.S. gold futures added 05 percent to end at $1,990.10.
The dollar and the US bond yields still sliding downwards.” Central banks demand is also very high. These are all bullish for gold. According to Edward Meir, Marex metals analyst, “the market is reassessing the drop seen yesterday.”
USD sank close to its lowest level for about two and a half months in a situation where markets assumed that interest rates should decline in 2014. As the dollar weakens it becomes cheaper for other currencies’ holders to buy gold.
In two months, benchmark U.S. 10-year Treasury yields had gone to the lowest level ever recorded since it last stood in a similar position earlier this week.
The minutes from the Fed’s latest meeting should be out by 1900GMT. The slowing down on US inflation bolsters the belief that the US central bank is finally done with raising interest rates.
The market is anticipating the Fed’s decision not to adjust rates in the December meeting while CME’s FedWatch Tool reveals that markets predict more than 50% possibility of a 25-basis-point reduction before May.
The fall in interest rate results to reduced opportunity-cost in gold holdings.
Meir added: “I think the minutes will be a non-event … Jerome Powell assured during his press briefing there would be no talk on cuts. It’s just the market anticipating cuts by the Fed.”
As inflation will “prove stubborn” and hold the fed fund rates up for a while than investors expect, Richmond Fed president Thomas Barkin said.
Spot silver rose 1% to $23.64 per ounce, platinum was flat at $918.59, while palladium eased 0.2% to $1,076.26.
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