Gold edges higher as the dollar pulls back

Gold prices edged higher on Wednesday as the dollar pulled back. Gold rose to $1,784 per ounce, testing the resistance at this level. If gold prices decline, support may be found near $1,739 per ounce, while further resistance may be encountered at $1,810 per ounce.

The dollar’s rally was halted on Wednesday, on reduced rate hike expectations. The dollar index dropped from the 105.5 level to 105.0. US Treasury yields also withdrew, with the US 10-year bond yielding dropping from 3.5% to 3.4%.

The US central bank’s next monetary policy meeting is scheduled for next week on the 14th and traders are trying to gauge the Fed’s intentions. A Fed blackout period has started on Saturday, which will last until the meeting, during which FOMC members do not deliver speeches that may reveal the central bank’s policy direction. The dollar maintained low volatility this week in the absence of more significant economic indicators and Fed rhetoric. 

Market expectations of future rate hikes were considerably trimmed in the past couple of weeks on cooling US inflation. Market odds are currently between a 50-bps and a 25-bps interest rate increase in December. Gold prices edged higher under diminished expectations of rate hikes. Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. 

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Written by:
Myrsini Giannouli

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