Gold prices held steady near a more than one-week high on Wednesday, as the US dollar edged lower after several Federal Reserve officials suggested that the recent surge in Treasury yields might make further rate hikes unnecessary.
The spot gold price was trading at $1,859.43 per ounce as of 0529 GMT after hitting its highest level since Sept. 29 on Tuesday. US gold futures changed little, at $1,872.80.
The dollar index, which measures the greenback against a basket of six major currencies, dipped to nearly a two-week low, making gold cheaper for holders of other currencies. The US 10-year Treasury yield also retreated from its 2007 high of 5.5% reached last week.
Investors were weighing the comments from several Fed policymakers, who expressed doubts about the need for more rate hikes amid rising inflation and slowing growth.
On Tuesday, Atlanta Fed President Raphael Bostic said the central bank does not need to raise interest rates any further to get inflation back down to the 2% target. Minneapolis Fed President Neel Kashkari echoed his remarks later that day, saying it was “possible” that the recent rise in longer-term yields meant the Fed could stop raising rates sooner than expected.
Higher interest rates tend to weigh on gold, which pays no interest and competes with yield-bearing assets.
Gold prices rebounded from their seven-month lows in late September as geopolitical tensions in the Middle East and uncertainty over the US-China trade talks boosted demand for the safe-haven metal.
The conflict between Israel and Hamas erupted over the weekend and has killed more than 1,400 people and triggered international calls for a ceasefire. The US has supported Israel’s right to defend itself, while China has urged both sides to exercise restraint and resume dialogue.
Meanwhile, the trade talks between the world’s two largest economies remain stalled as both sides accuse each other of unfair practices and impose tariffs on billions of dollars worth of goods. The US is set to impose a new round of tariffs on $200 billion worth of Chinese imports on Oct. 15 unless a deal is reached before then.
Gold is often seen as a hedge against political and economic risks and inflation.
Analysts said gold prices could rise further if the Fed confirms its dovish stance at its next policy meeting on Oct. 30-31 or if the trade tensions escalate.
“Gold remains supported by the Fed’s cautious outlook and the ongoing trade war,” said Edward Moya, senior market analyst at OANDA. “If we see a breakdown in trade talks or a further escalation in the Middle East, gold could easily rally towards $1,900.”
However, some analysts also warned that gold could face headwinds from a stronger US economy and a resilient stock market, which could reduce its appeal as an alternative asset.
“The US economy is still outperforming most of its peers, and the stock market is near record highs,” said Fawad Razaqzada, market analyst at Forex.com. “These factors could limit gold’s upside potential in the near term.”
Source: CNBC
