In anticipation that the US Federal Reserve will take a less aggressive approach to rate rises moving ahead, gold prices slipped down on Tuesday from a more than eight-month high achieved in the previous session.
After reaching its highest level since the end of April on Monday, spot gold dropped 0.4% to $1,910.60 per ounce at 11:01 a.m. ET (1601 GMT). The price of U.S. gold futures fell by 0.5% to $1,913.00.
The U.S. dollar index stopped falling and stabilized close to 102.340. Gold costs higher for holders of foreign currencies when the dollar is stronger.
“We see this more as a tepid retracement inside our sideways-to-higher trend. According to David Meger, director of metals trading at High Ridge Futures, “we think the combination of the lower dollar and sticky inflation fears continues to underpin our underlying favorable environment.
Investors may choose zero-yield gold since lower rates translate into reduced returns on interest-bearing assets like government bonds.
While most Fed officials anticipate rates to remain north of 5% throughout the next year, traders anticipate a 90.6% chance that the Fed will raise rates by 25 basis points in February and predict that rates will peak at 4.94% in June.
After four consecutive 75 basis point increases, the U.S. central bank increased interest rates by 50 basis points in December. Even if China’s economy contracted in 2022, World Economic Forum experts predicted that the openness of the nation will boost global growth over forecasts.
Prior to the Lunar New Year festivities, which begin on January 21, China typically increases its gold purchases. In a letter dated Friday, Goldman Sachs said, “We anticipate gold prices to trend around $1,950/oz in 2023. As compared to 2022 levels, anticipate that China’s reopening and greater central bank purchases will bolster gold prices in 2023.