Gold prices on Tuesday edged lower from a more than eight-month peak hit in the previous session on hopes that the US Federal Reserve would adopt a less aggressive approach to rate hikes going forward.
Spot gold fell 0.4% to $1,910.60 per ounce by 11:01 a.m. ET (1601 GMT), after hitting its highest since April-end on Monday. U.S. gold futures were down 0.5% to $1,913.00.
The U.S. dollar index halted its slide and held near 102.340. A stronger dollar makes gold more expensive for other currency holders.
“We’re looking at this as more of a slight pullback within our sideways-to-higher trend. We believe the combination of the weaker dollar and sticky inflation concerns continues to support our underlying positive environment,” said David Meger, director of metals trading at High Ridge Futures.
With lower rates translating into lesser returns on interest-bearing assets such as government bonds, investors may prefer zero-yield gold.
Traders expect 90.6% odds of a 25 basis point rate hike from the Fed in February and see rates peaking at 4.94% in June, while most Fed officials see rates landing north of 5% into the next year.
The U.S. central bank raised interest rates by 50 basis points in December after four straight 75 basis points hikes.
Meanwhile, China saw economic growth slumping in 2022, but officials at the World Economic Forum said the country’s reopening could drive global growth beyond expectations.
Gold buying in China normally picks up ahead of the Lunar New Year holidays, which run from Jan. 21.
“We expect gold prices to trend around $1,950/oz in 2023,” Goldman Sachs said in a note dated Friday.
“Expect the China reopening and increased central bank purchasing to be supportive of gold prices in 2023, relative to 2022 levels.”
Elsewhere, spot silver dropped nearly 2% to $23.93 per ounce, platinum dipped 1.7% to $1,044.63 while palladium was down 1.9% to $1,716.97.
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