Gold prices traded below the US$2,650 level on Wednesday as market participants adopted a cautious stance ahead of the Federal Open Market Committee (FOMC) meeting minutes, set for release later in the session.
The precious metal faced headwinds from elevated U.S. bond yields and a robust U.S. dollar, both underpinned by expectations of slower rate cuts by the Federal Reserve in 2025.
By 3:50 pm AEDT (4:50 am GMT) spot gold was trading $2.29 or 0.1% lower at US$2,646.37 per ounce.
The yellow metal's appeal was further tempered by strong economic data from the U.S.
The ISM Services Purchasing Managers' Index (PMI) for December rose to 54.1, while the “Prices Paid” component hit its highest level in nearly two years, signalling persistent inflationary pressures.
Meanwhile, the Job Openings and Labor Turnover Survey (JOLTS) showed an unexpected rise in job openings to 8.1 million in November, reinforcing the view of a resilient U.S. labour market.
The data drove the yield on the benchmark 10-year U.S. Treasury bond to its highest since April, while the U.S. dollar strengthened.
However, geopolitical tensions and economic uncertainties offered some support to gold. Trade war fears, concerns over U.S. President-elect Donald Trump's potential tariff policies, and ongoing geopolitical risks in the Middle East provided a safety net for the precious metal. Trump recently hinted at possible military action in Gaza if Israeli captives are not released, heightening tensions in the region.
Meanwhile, traders look to upcoming U.S. economic data, including the ADP private-sector employment report and weekly jobless claims for further cues.