Gold prices retreats anticipating Fed minutes

Gold prices retreated slightly on Wednesday, following a rally driven by Western fund inflows and optimism about US interest rate cuts. Investors awaited the Federal Reserve’s meeting minutes for more insight into the extent of potential cuts.

Spot gold edged 0.1 per cent at $2,517.08 per ounce as of 0427 GMT, after reaching an all-time high of $2,531.60 on Tuesday. US gold futures also increased 0.2 per cent to $2,554.90.

Gold has surged by nearly $470 or 22 per cent so far this year, driven by geopolitical tensions, uncertainty surrounding the upcoming US Presidential elections, and the anticipation of rate cuts.

“Gold’s glittering rally is a reflection of markets anticipating deeper Fed cuts,” said OCBC FX strategist Christopher Wong.

Traders are now fully pricing in a rate cut at the Fed’s September meeting, with a 68 per cent probability of a 25-basis point reduction, according to CME FedWatch tool.

The dollar weakened to its lowest level this year, and benchmark 10-year Treasury yields also declined, making non-yielding gold more attractive to investors.

Traders are eagerly awaiting the release of the Fed’s July meeting minutes later today and Fed Chair Jerome Powell’s speech on the US economic outlook at Jackson Hole this Friday.

“Given that the markets have already expected deep cuts to some extent, the bar is high for Powell to out-dove markets. Some reality check may suffice and not ruling out a pullback on gold prices in the near term,” Wong added.

The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, saw a slight decline of 0.20 per cent in its holdings on Tuesday from seven-month highs.

Spot silver rose 0.3 per cent to $29.52 per ounce, platinum gained 0.6 per cent to $951.55, and palladium fell 0.1 per cent to $924.60.

Attribution: Reuters

Subediting: M. S. Salama