Gold prices dip on US rate cut uncertainty, economic data

WASHINGTON: Gold prices edged lower on Wednesday, pressured by higher US Treasury yields and a stronger dollar after data suggested the Federal Reserve might slow the pace of rate cuts this year.

Spot gold slipped 0.1 per cent to $2,648.16 per ounce, as of 0308 GMT. US gold futures fell 0.1 per cent to $2,662.30.

“The dollar index bounced back on hopes that we may see bit of a less volatile monetary policy from the Fed this year so overall there is some weakness in gold prices being displayed,” said Kelvin Wong, OANDA’s senior market analyst for Asia Pacific.

The dollar strengthened and benchmark 10-year Treasury yield hit an eight-month high after data on Tuesday pointed to a strong economy.

US job openings in November grew to 8.098 million, exceeding forecasts, and higher than October’s numbers of 7.839 million.

Markets are currently pricing in the probability of just one Fed cut in 2025, down from two in December, according to the CME FedWatch tool.

The market now awaits US nonfarm payrolls report on Friday for more clues on the Fed’s policy path. ADP employment numbers and the minutes from the Fed’s December meeting, due later in the day, are also on investors’ radar.

“Any softness in the US macro data this week could open the door for gains if investors become more optimistic about the deliverance of interest rate cuts from the Fed in 2025,” said analysts at KCM Trade in a note.

The Fed’s projections in December implied a shift to a more cautious pace of rate cuts this year, with most policymakers expressing concern that inflation could reignite.

Bullion is considered a hedge against inflation, but high rates reduce the non-yielding asset’s appeal.

Meanwhile, top consumer China added gold to its reserves in December for a second straight month, official data by the People’s Bank of China showed on Tuesday.

Spot silver added 0.3 per cent to $30.11 per ounce, platinum dropped 0.5 per cent to $946.11 and palladium edged 0.2 per cent lower to $923.87.

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