EDITOR'S NOTE: Gold is hovering at an 8-month high and is closing in on $1,900 an ounce. Some analysts attribute this to a drop in the dollar following economic data prompting the Fed to slow the pace of its rate hikes. Other analysts point to central bank buying, prompted by cheap prices amid rising geopolitical and global economic uncertainty. Still, many economists are forecasting gold to reach upwards of $4,000. That seems to be the consensus. And given gold’s current levels, its price is still considered within a discount range.
Gold prices cooled slightly after hitting an eight-month high on Monday, as a weak dollar's boost was offset by Federal Reserve officials reiterating their aggressive stance against inflation.
Spot gold rose 0.3% to $1,870.45 per ounce by 1:48 p.m. ET (1848 GMT), after hitting its highest since May 9 earlier in the session at $1,881.5.
U.S. gold futures settled up 0.4% at $1,877.8.
The dollar was near its lowest in seven months, making gold cheaper for overseas buyers. Benchmark U.S. 10-year Treasury yields hit three-week lows.
"Interest rates are looking like they're going to continue higher. But they do have a limit of what they can do and the market is pricing that in," said Bob Haberkorn, senior market strategist at RJO Futures.
"We are also seeing some flight to safety. Technically, gold looks like it has more room to go because it's been strong through all these resistance points that we continue to see."
While San Francisco Federal Reserve President Mary Daly said that either a 50 basis point or a 25 bps rate hike was a possibility in the upcoming Jan. 31-Feb. 1 meeting, Atlanta Fed President Raphael Bostic commented that it was appropriate to be 'more cautious' in calibrating rates, with rates possibly staying higher into 2024.
Money market bets show 75% odds of a 25-basis point hike at the Fed's February policy meeting, with the terminal rate expected just below 5% by June.
Higher interest rates dim bullion's appeal as an inflation hedge and raise the opportunity cost of holding the non-yielding asset.
Traders now await Fed Chair Jerome Powell's speech at a central bank conference in Stockholm on Tuesday and closely watched U.S. consumer price index data due later this week that could offer more cues on the U.S. rate hike path.
Spot silver fell 0.5% to $23.69 per ounce, platinum was steady at $1,090.5, and palladium dipped 1.8% to $1,773.25.
Originally published by Seher Dareen at Reuters