Gold prices experienced a slight decline on Thursday as the strength of the dollar and Treasury yields persisted, with market participants eagerly awaiting a series of U.S. economic data releases later in the day. The outcome of these data points is expected to provide further insights into the potential timing of the Federal Reserve’s first interest rate adjustment this year.
At 1009 GMT, spot gold fell by 0.2% to $2,169.77 per ounce, following a record high of $2,194.99 reached on March 8. Similarly, U.S. gold futures also dipped by 0.3% to $2,174.60.
The steady performance of the U.S. dollar against other currencies has made gold less appealing to investors, while benchmark U.S. 10-year Treasury yields climbed to a level not seen in over a week.
UBS analyst Giovanni Staunovo noted, “Market participants are still considering the possibility of a mid-year U.S. rate cut, providing support to gold. The upcoming FOMC meeting and potential adjustments in the dot plot projections are anticipated to be key drivers for the precious metal.”
While the Federal Reserve is expected to maintain interest rates at its upcoming policy meeting, focus remains on the projections outlined in the “dot plot.” The central bank had previously indicated three quarter-point rate cuts for 2024 during its December meeting.
Looking ahead, gold prices are likely to exhibit volatility in the short term, with a positive outlook targeting $2,250 per ounce by year-end, supported by anticipated rate cuts from mid-year onwards and increased investment demand.
Traders are currently factoring in a 66% probability of interest rate cuts in June, slightly lower than the 72% probability prior to recent CPI data releases, according to the CME Group’s FedWatch Tool. Lower interest rates typically benefit gold by reducing the opportunity cost of holding the non-yielding asset.
Investor attention is focused on forthcoming U.S. economic indicators such as the producer price index, retail sales, and weekly jobless claims data scheduled for release at 1230 GMT.
In the precious metals market, spot platinum dipped by 0.1% to $934.55 per ounce, while palladium rose by 0.4% to $1,063.99. Silver slipped by 0.1% to $25.02 after reaching a more than three-month high earlier in the session.