Gold reaches a two-week peak on a weaker dollar, Fed minutes are in focus

Gold prices went up to their highest level in two weeks on Tuesday, the price came amid a weaker U.S. dollar and lower Treasury yields as investors wait for the Federal Reserve’s minutes from the latest meeting that holds cues on its interest rate outlook.

Minutes from the Fed’s latest meeting are due at 1900 GMT.

Signs of slowing inflation in the U.S. have enhanced expectations that the U.S. central bank was done raising interest rates.

Spot gold was up 0.7 percent at $1,991.37 per ounce, as of 0713 GMT. U.S. gold futures gained 0.7 percent to $1,993.50.

“The dollar and the U.S. bond yields continue to come down. Demand from central banks is also quite strong. All these are bullish for gold. The market is reconsidering that drop we saw yesterday,” Edward Meir, a metals analyst who provides research for Marex stated.

The dollar rate dropped to more than a one to two months’ low as investors expect U.S. interest rates to also drop next year. A weaker dollar results in gold value dropping for other currency holders.

Benchmark U.S. 10-year Treasury yields floated near two-month lows touched last week.

Markets are widely expecting the Fed to leave rates unchanged in the December meeting and currently pricing in a greater than 50 percent chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool.

Lower interest rates decrease the opportunity cost of holding gold.

“We believe the main factors buoying gold in 2024 will be interest rate cuts by the U.S. Fed, a weaker U.S. dollar, and high levels of geopolitical tension,” Fitch Solutions analysis unit BMI said in a note.