As the dollar and bond rates fell on Tuesday, gold prices rose above $2,000 as investors considered whether the U.S. Federal Reserve would pause its rate-hike cycle after a widely expected increase in May.
After touching a two-week low of $1,981.19 the previous session, spot gold was up 0.7% at $2,008.55 per ounce at 1025 a.m. EDT (1425 GMT). U.S. gold futures rose 0.6% to $2,020.10.
While benchmark U.S. Treasury yields fell, the dollar index rose, making greenback-priced bullion more appealing to foreign buyers.
Gold traders want rate reduction quickly. “The market has priced in a summer cutting cycle,” said TD Securities commodity strategist Daniel Ghali.
Markets are putting in an 87% chance of a 25-basis-point raise at its May 2-3 meeting and a 2-in-3 possibility of a pause in June, according to CME FedWatch.
Higher interest rates to offset rising prices reduce demand for the zero-yielding metal, negating its inflation-hedging role.
St. Louis Federal Reserve President James Bullard said the U.S. Fed should keep raising rates since inflation is persistent and the economy is slowly improving.
This week, markets will focus on Fed statements before the April 22 blackout ahead of the May meeting.
“We maintain an overall bullish outlook for gold and silver,” Saxo Bank head of commodity strategy Ole Hansen said in a note, citing an approaching rate peak, central bank demand, and geopolitical risks.
Silver rose 0.5% to $25.21 per ounce, platinum over 3% to $1,078.90, and palladium 4.2% to $1,624.74.
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