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Gold prices fell by over 1% on Wednesday on the back of a resurgent US dollar and profit taking by short-term traders despite entering the new year on a high.
Spot gold was down 1.3% at $2,032.82 per ounce as of 12:15 p.m. EDT, Three-month US gold futures saw a larger loss at 1.6%, trading at $2,039.70 per ounce in New York.
[Click here for an interactive chart of gold prices]
Meanwhile, the US dollar index is coming off its biggest daily gain since July, supported by higher US yields, which made dollar-priced bullion more expensive for overseas buyers.
Still, the outlook for gold remains positive amid expectations that the Federal Reserve will cut interest rates sometime this year. Also, the possibility of escalation in the Red Sea should keep gold prices supported, noted Daniel Pavilonis, senior market strategist at RJO Futures.
Bullion is coming off a hefty gain of 13% in 2023, its first annual rise since 2020, and is forecast to reach record highs in 2024 should the lower interest rate environment materialize.
“As we saw how much of a lift the price of gold obtained from expectations of rate cuts in 2023, we could well see significant gains in 2024 when central banks actually start loosening their policies,” said Fawad Razaqzada, market analyst at City Index, in a Reuters note.
He added that the actual timing and extent of the rate cuts will depend on incoming data throughout the year.
This week, market attention is on the minutes, scheduled for Thursday, of the last Fed meeting. Data on US job openings and December non-farm payrolls, both due on Friday, will also be closely followed.
(With files from Reuters)
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