Swaps markets showed wagers on a rate reduction in June are now at 63%, down from 69% late last week, after Fed Bank of Atlanta President Raphael Bostic on Monday reiterated his expectation for just one cut this year.
Still, gold remains near an all-time high as the central bank’s long-awaited pivot to monetary easing builds momentum in the market. Bullion’s gains since mid-February have also been underpinned by long-standing supports including heightened geopolitical risks in the Middle East and Ukraine, plus buying by central banks, led by China.
Inflation and interest rates are also in focus in Europe. European Central Bank Governing Council member Madis Muller said data over the coming weeks may be sufficient to confirm the slowdown in inflation by the time policymakers set borrowing costs in June.
[Click here for an interactive chart of gold prices]
The precious metal was also bolstered on Tuesday by weaker US dollar, which snapped a two-day rally after the People’s Bank of China on Monday set a stronger-than-expected reference rate for the yuan.
Bullion “moved higher again as the underlying demand for gold staying firm amid the prospect for rate cuts, geopolitical tensions, and today a slightly softer dollar,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S.
Spot gold rose 1% to $2,193.92 an ounce as of 10:38 a.m. in London. The Bloomberg Dollar Spot Index was down 0.1%. Silver and platinum edged higher, while palladium fell.
(By Sybilla Gross and Jack Ryan)