Gold Prices Rise on Weaker Dollar and Uncertain Fed Rate Hike Path
Synopsis
The price of gold increased on Tuesday due to a weaker dollar, while investors sought clarity on the U.S. Federal Reserve's rate hike path. Although gold has risen nearly 10% year-to-date, bids for a fresh record high may be limited until there is greater certainty to Fed rate cuts later this year.
Gold Prices Increase on Weaker Dollar and Uncertain Fed Rate Hike Path
On Tuesday, the price of gold increased due to a weaker dollar, and investors sought clarity on the U.S. Federal Reserve's rate hike path. The spot gold rose to $2,003.45 per ounce, and U.S. gold futures increased to $2,016.30. Gold's rise of nearly 10% year-to-date is mainly due to its function as a safe haven during uncertain economic times. However, bids for a fresh record high may be limited until there is greater certainty to Fed rate cuts later this year.
Dollar Decline Impacts Gold
The dollar decreased in value after New York state factory activity increased, leading to expectations of the U.S. central bank hiking rates in May. This affected gold, pushing it to a two-week low, as a stronger dollar makes gold more expensive for holders of other currencies.
Gold as a Hedge Against Inflation and Economic Uncertainties
Gold is considered a hedge against inflation and economic uncertainties, but higher interest rates reduce its appeal. Benchmark yields were close to three-week highs, and markets are pricing in an 85.4% chance of a 25 basis point hike in May.
Economic Slowdown and Weakening Dollar Supports Gold's Background Influences
StoneX analyst Rhona O'Connell noted that the majority of U.S. data indicates an economic slowdown and a weakening dollar, supporting gold's background influences. Attention will now focus on comments from Fed officials before they enter a blackout period ahead of the central bank's May 2-3 meeting. Markets will also be observing for reports from significant U.S. banks later in the day following positive outcomes from other banks last week.
Spot Silver Declines, Platinum Rises, and Palladium Surges
In the meantime, spot silver declined to $25.1026 per ounce, platinum rose to $1,071.97, and palladium surged to $1,612.8232.
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