Gold prices kicked off 2023 by hitting their highest levels in more than six months on Tuesday as benchmark Treasury yields fell, while investors assessed the prospects for more Federal Reserve interest rate hikes, which acted as a significant headwind to bullion last year.
Spot gold, which had ended a volatile 2022 little changed, was up 0.8% to $1,838.56 per ounce by 1:42 p.m. ET (1842 GMT) after touching its highest level since June 17 earlier at $1,849.89.
U.S. gold futures settled up 1.1% at $1,846.1.
With an economy that could go into recession, uncertainty over the Fed’s rate-hike path and geopolitical risks, “investors remain a little cautious, and gold is looking pretty attractive,” said Edward Moya, senior analyst with OANDA.
Benchmark U.S. 10-year Treasury yields were near their lowest in a week, reducing the opportunity cost of holding non-yielding gold. The dollar index jumped 1%.
The market focus is now on the release on Wednesday of the minutes from the Fed’s Dec. 13-14 policy meeting as well as other economic data expected this week.
If the minutes reveal that the U.S. central bank is considering slowing the pace rate hikes and ending the hiking cycle at a lower peak rate, there will be “scope for further increases in the price of gold,” said Ricardo Evangelista, senior analyst at ActivTrades.
While gold is seen as a hedge against economic uncertainty, it tends to loose appeal in a high interest rate environment.
Auto-catalyst metal palladium dipped 5.3% to $1,699.58 per ounce, with “recession fears and a darkening outlook for electric vehicles” weighing on both platinum and palladium, Moya said.
Spot silver rose 0.3% to $24.07, while platinum jumped 1.5% to $1,085.50. (Reporting by Seher Dareen and Arundhati Sarkar in Bengaluru; Editing by Paul Simao and Shailesh Kuber)