Gold prices climbed on Thursday as the dollar dipped, lifting bullion from previous session’s sharp retreat on uncertainty over the U.S. Federal Reserve’s rate-hike path fuelled by hawkish commentary from some policymakers.
Spot gold rose 0.5% to $2,003.17 per ounce, after hitting a more than two-week low of $1969.1 in the previous session. U.S. gold futures rose 0.3% to $2,012.50.
“Gold has performed a good recovery bearing in mind the dollar recovery and yet again the path of least resistance looks to be higher,” independent analyst Ross Norman said, adding gold in the short term would be driven by the dollar outlook.
The dollar index edged 0.1% lower, making greenback-priced gold less expensive for holders of other currencies.
Looking ahead, Norman sees weakness in the dollar as the Fed is close to reaching the end of its tightening cycle, which could benefit gold, which yields no interest.
The CME FedWatch tool shows markets pricing in an 80% chance of a 25 basis-point hike in May, while a Reuters poll found that the rate-hike would be the final one in 2023, with the Fed holding rates steady for the rest of the year.
Investors are keeping a close on remarks by Fed policymakers on the rate-hike path, before the officials enter a blackout period on April 22 ahead of the central bank’s May 2-3 meeting.
New York Fed President John Williams said on Wednesday inflation is still at problematic levels and the Fed will act to lower it.
While core inflation in the U.S. was still high and the ECB and BoE would likely continue to raise rates to bring inflation down, that could be the Fed’s path ahead as well, said Peter Fertig, an analyst with Quantitative Commodity Research.