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Gold prices rise on weaker dollar

Gold prices

Spot gold was 0.2% higher at $2,032.39 per ounce after reaching a three-week low on Monday

Gold prices rose on Tuesday, supported by a pullback in the US dollar after an official US report citing consumers expect lower inflation strengthened bets for interest rate cuts from the Federal Reserve.

Spot gold was 0.2% higher at $2,032.39 per ounce, as at 0157 GMT, after reaching a three-week low on Monday.

US gold futures also gained 0.2% to $2,038.30 per ounce.

A New York Federal Reserve report on Monday said consumers expect lower inflation as well as weaker income and spending over the next several years.

Fed governor Michelle Bowman retreated from her persistently hawkish view, saying she now sees US monetary policy as “sufficiently restrictive” and indicated her willingness to support eventual interest-rate cuts as inflation eases.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

The US dollar index dropped 0.1%, making bullion more attractive for other currency holders.

Earlier this month, a stronger-than-expected jobs data along with the latest Fed minutes that noted an uncertainty over the timings of rate cuts, tempered some sentiments for an early interest rate cut.

Market participants are pricing in an around 62% chance of a rate cut by the Fed in March, down from a nearly 90% probability seen before the New Year, as per the CME FedWatch tool.

Investors now await Thursday’s US CPI report for further clarity on the scale and depth of the Fed’s rate cut.

Asia’s stock indexes were mostly up on Tuesday after a tech-led surge on Wall Street.

Meanwhile, core inflation in Japan’s capital slowed for the second consecutive month in December, taking some pressure off the central bank to rush into exiting ultra-loose monetary policy.

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