Gold prices hovered close to all-time highs on Wednesday, with investors weighing a hawkish tilt in Federal Reserve sentiment against renewed dollar strength.
By 3:55 pm AEST (5:55 am GMT), spot gold was up $10.50, or 0.3%, at US$3,774.47 per ounce, pulling back slightly from its lifetime high of $3,791 touched earlier this week. The move mirrored Tuesday’s retracement in Asian trading as buyers consolidated positions ahead of more Fed speeches.
ANZ analysts noted: “Demand has been supported by strong inflows into countries’ strategic reserves in recent years.
"The People’s Bank of China is looking to take advantage of this shift by becoming a custodian of foreign gold reserves. It’s looking to encourage friendly countries to buy bullion and store it in the Shanghai Gold Exchange.”
With no major U.S. data due on Wednesday, traders are turning attention to Friday’s release of the U.S. core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, for signals on the outlook for interest rate cuts.
On Tuesday, Fed Chair Jerome Powell offered little fresh guidance in a speech to the Greater Providence Chamber of Commerce, reiterating the central bank’s cautious approach.
Traders, however, remain convinced that more easing lies ahead, with the CME Group FedWatch Tool showing a 94.1% probability of a rate cut at the Fed’s October meeting, up from 89.8% before Powell’s remarks.
The shift in Fed sentiment has capped further gold gains, allowing the U.S. dollar to rebound after two straight sessions of losses.
