Three 1kg gold bullion bars worth over 155,00 GBP lay on the counter in a gold dealers in Birmingham’s jewelry quarter on December 13, 2023 in Birmingham, England. Gold prices have increased since the Ukraine War but have soared to record highs since the start of the Hamas-Israel war. Other factors are the weakening US dollar and expected rate cuts from the Federal Reserve.
Christopher Furlong | Getty Images
Gold prices inched lower on Wednesday as strong U.S. economic data doused hopes for early interest rate cuts by the Federal Reserve, while investors awaited a slew of economic reports this week.
Spot gold fell 0.3% to $2,023.69 per ounce by 0537 GMT. U.S. gold futures dipped 0.1% to $2,024.50.
“Recent economic data out of the U.S. has called for some recalibration in dovish market rate expectations, with some pushback on the timeline for Fed rate cut weighing on gold’s appeal,” said IG market strategist Yeap Jun Rong.
“That said, rising geopolitical tensions may limit its downside… with the $2,000 level on watch as near-term support to hold,” Rong said.
The dollar index edged 0.2% lower, but hovered near a six-week high hit on Tuesday. Benchmark 10-year Treasury yield also slipped, but held above 4%.
In wider financial markets, Asian shares rose on optimism that Chinese authorities would offer support for its stock markets, which have plummeted to multi-year lows.
Market focus is on the U.S. flash PMI report due at 1445 GMT, fourth-quarter advance GDP estimates on Thursday, and personal consumption expenditures data on Friday.
Traders are pricing in five quarter-point Fed rate cuts in 2024, down from six cuts two weeks ago.
Initially seen in March, the first cut is now expected in May with an 89% probability, according to LSEG’s interest-rate probability app IRPR.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
A Fed official last week said the baseline for cuts to start was in the third quarter.
Spot silver dipped 0.3% to $22.38 per ounce, platinum was unchanged at $900.36, and palladium fell 0.7% to $941.74.