Gold firmed on Wednesday as Treasury yields eased, stabilizing after a rapid retreat from a record high hit earlier this week, while investors braced for the U.S. jobs report for further clues on how soon interest rate cuts may materialize.
Spot gold rose 0.3% to $2,025.67 per ounce. U.S. gold futures settled 0.4% higher at $2,043.80.
Benchmark 10-year Treasury yields hit a more than three-month low.
Gold scaled an all-time peak of $2,135.40 on Monday on elevated bets for a Fed cut, before dropping more than $100 on uncertainty over the timing of the reductions.
Further direction could come from the U.S. non-farm payrolls data due on Friday, coming ahead of the U.S. central bank’s policy meeting next week.
“Gold and silver traders are sitting on a tinderbox, and this payroll Friday could spark the flames … While we expect macro headwinds to weigh on precious metals short positions in the medium term, the current set-up is ripe for a squeeze,” analysts at TD Securities said in a note.
Traders are pricing in about a 60% chance of a rate cut by March next year, CME’s FedWatch Tool showed.
Safe-haven inflows driven by wars in Ukraine and the Middle East, coupled with the rate cut bets, have driven a more than 10% rise in bullion prices. Lower interest rates make zero-yield gold more attractive than competing assets such as bonds and the dollar.
Anticipation of monetary easing is the biggest driver of gold now and prices should move higher into next year, said Daniel Pavilonis, senior market strategist at RJO Futures. “Geopolitics can play an important role in moving gold up, for the remainder of this year and next year.”
Silver fell 1% to $23.88 per ounce, while platinum dropped 1% to $890.23, both down for a third straight session.
Palladium climbed 1.3% to $946.20, snapping a six-session losing streak from last session’s five-year low.