Gold hits near 7-month peak as dollar, yields weaken on Fed rate cut bets

GOLD prices touched a nearly seven-month high on Wednesday propelled by an extended decline in the US dollar and bond yields as investors grew confident that the Federal Reserve would likely cut rates by the first half of next year.

Spot gold rose 0.2 per cent to US$2,044.53 per ounce by 0453 GMT after hitting its highest since May 5. US gold futures for December delivery rose 0.3 per cent to US$2,045.40 per ounce.

“Gold is driven by an increasing market expectation of a Fed pivot from a hawkish tilt to a dovish tilt in the first half of next year - earlier than it did before,” said Kelvin Wong, senior market analyst for Asia Pacific at Oanda.

“The key point data to look for is the PCE (personal consumption expenditures) data and markets are expecting another slowdown in inflationary pressure in US,” said Wong.

Fed Governor Christopher Waller - a known hawkish and influential voice at the central bank - on Tuesday flagged a possible rate cut in the months ahead, feeding market expectations that US rates have peaked.

Traders are now pricing in a more than 70 per cent chance of rates easing in May next year, compared with a 50 per cent chance on Tuesday, CME’s FedWatch Tool shows.

Lower interest rates reduce the opportunity cost of holding non-interest-bearing bullion.

Investors’ attention is now on the revised US third-quarter GDP figures, due at 1330 GMT and on key PCE data - Fed’s preferred inflation gauge - on Thursday.

Making gold less expensive for other currency holders, the dollar index slid to a more than three-month low against its rivals, and was poised to mark its worst monthly performance in a year. Meanwhile, yields on 10-year Treasury notes fell to an over two-month lows of 4.2860 per cent.

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According to Reuters’ technical analyst Wang Tao, spot gold may extend gains into a range of US$2,059 to US$2,069 per ounce.

Spot silver fell 0.2 per cent to US$24.96 per ounce, platinum was down 0.3 per cent to US$937.41. Palladium was steady at US$1,054.75 per ounce. REUTERS