Gold hovers near $2,000 level as Fed pause bets lend support

A weaker dollar makes gold less expensive for other currency holders.

Gold prices hovered near the key $2,000 level on Wednesday, as expectations of an end to the U.S. Federal Reserve’s rate hike cycle kept the dollar and U.S. bond yields subdued.

Spot gold was up 0.1% at $2,000.12 per ounce as of 1033 GMT, after rising as high as $2006.19 earlier in the session. Bullion scaled a three-week high of $2,007.29 on Tuesday.

U.S. gold futures were steady at $2,002.10.

"The macroeconomic backdrop is turning supportive (for gold) as moderating inflation in the U.S. raises prospects for the end of the U.S. interest rate hiking cycle. The decline in US yields and the US dollar are increasing the investment appeal for gold," wrote analysts at ANZ in a note.

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

Markets are confident there won’t be another rate hike, and are currently pricing in a nearly 60% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool.

Lower interest rates decrease the opportunity cost of holding gold.

The dollar rose 0.2% against its rivals, but held near a more than 2-1/2-month low touched on Tuesday. Meanwhile, benchmark U.S. 10-year Treasury yields ticked lower. [US/] [USD/]

A weaker dollar makes gold less expensive for other currency holders.

"Price dips are probably a good buying opportunity considering at some point the Fed will cut interest rates," UBS analyst Giovanni Staunovo said, forecasting the gold price would increase by the end of 2H24 to target $2150 level by end-2024.

Spot silver rose 0.5% to $23.84 per ounce, while platinum was steady at $934.74. Palladium slipped 0.6% to $1,071.77.