Gold up on weaker dollar as investors wait on Fed rate path

Gold prices slightly rose as the U.S. dollar dipped, but holiday-thinned trading and Federal Reserve rate uncertainty kept investors cautious.

Gold prices edged up on Thursday as the U.S. dollar ticked lower, but investors remained largely on the sidelines in holiday-thinned trading with uncertainty around the Federal Reserve's rate path.

Spot gold was up 0.1% to $1,991.79 per ounce at 3:22 p.m. ET (2022 GMT). U.S. gold futures were flat at $1,993.30.

"Absent any fresh influences, I still don't think that gold has the momentum to maintain prices much above $2,000 for the rest of the year," said StoneX analyst Rhona O'Connell.

"Underlying forces are still supportive for the longer term - geopolitics, especially the Middle East and the probability of further banking stresses in the States and elsewhere - but unless either or both of these escalate, we are likely to see prices drift."

Supporting gold, the dollar (.DXY) eased 0.1% against a basket of other major currencies. Benchmark U.S. 10-year Treasury yields closed at a two-month low on Wednesday.

Lower interest rates decrease the opportunity cost of holding gold.

Trading is expected to be thin with most U.S. markets closed for the Thanksgiving holiday.

"Dollar is slightly cooling down after yesterday's (economic) data, but it's very feeble... it's just a normal market movement amidst lower liquidity," said ActivTrades senior analyst Ricardo Evangelista.

Investors dialled back expectations of rate cuts in 2024 after data on Wednesday showed the number of Americans filing new claims for unemployment benefits fell more than expected last week.

"The uncertainty in relation to what the Fed will do next will persist for a bit longer," said Evangelista.

Fed officials agreed at their most recent policy meeting that they would proceed "carefully" and only raise interest rates if progress in controlling inflation faltered, the minutes of the Oct. 31-Nov. 1 gathering showed on Tuesday.

Spot silver rose 0.2% to $23.66 per ounce, platinum fell 0.7% to $915.55 and palladium dropped 1.1% to $1,045.79.