Gold prices edged higher on Thursday, following sharp gains in the previous session, as the U.S. dollar and bond yields weakened on rising odds of a rate cut by the Federal Reserve as early as September.
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Gold prices edged lower on Thursday as the dollar rebounded, even as signs of cooling U.S. inflation bolstered hopes the Federal Reserve will cut interest rates this year and kept prices near one-month highs.
Spot gold fell 0.3% to $2,377.93 an ounce, having hit its highest since April 19 earlier in the session. Gold prices rose more than 1% on Wednesday.
Meanwhile, U.S. gold futures for June delivery fell 0.5% to $2,382.80 an ounce.
Jim Wyckoff, senior analyst at Kitco Metals, said: “Short-term futures traders are facing some routine profit-taking pressure after the recent rise in the gold market, and today’s strength in the U.S. dollar index has also exacerbated this pressure.”
The dollar rose 0.2% against other currencies after hitting multi-month lows in the previous session after data showed U.S. consumer prices rose less than expected in April.
A stronger dollar makes gold more expensive for holders of other currencies.
At the same time, New York Federal Reserve President John Williams said that positive news about cooling inflation is not enough to require the Federal Reserve to cut interest rates as soon as possible. Lower interest rates reduce the opportunity cost of holding non-yielding gold.
According to CME’s FedWatch tool, market participants expect the probability of the Federal Reserve to cut interest rates in September is about 68%.
“A weaker U.S. dollar, lower U.S. Treasury yields and rising geopolitical tensions have provided support to gold over the past week, and we expect gold prices to remain at $2,250 in the coming months,” Fitch Solutions analytics arm BMI said in a report. /oz above.
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