Gold prices rose in the European market on Wednesday to recover some of the losses incurred in the previous session, supported by a decline in the US dollar and a drop in US Treasury bond yields.
The minutes of the Federal Reserve's latest meeting will be released later today, and are expected to contain crucial clues about the likelihood of US interest rate hikes during the remainder of this year.
Price overview
Gold prices today: Gold prices rose by 0.65% to ($4,362.06), from the opening level of trading at ($4,334.33), and recorded a low level at ($4,324.73).
When prices were settled on Tuesday, gold prices lost about 1.9%, their first loss in three days, due to growing concerns about the possibility of renewed military confrontations between the United States and Iran.
US dollar
The dollar index fell by more than 0.2% on Wednesday, resuming its losses that had paused temporarily the previous day, reflecting a renewed decline in the levels of the US currency against a basket of major and minor currencies.
This decline comes as investors shift their focus to assessing the future path of US interest rates, especially after the likelihood of a rate hike this year decreased, following data showing that US inflation slowed to levels below market expectations, coinciding with worrying signs of a slowdown in the US labor market.
US Treasury yield
The yield on 10-year US Treasury bonds fell by more than 0.5% on Wednesday, extending its losses for the second consecutive session, which puts further negative pressure on the US dollar exchange rate.
US interest rate
According to the CME Group's FedWatch tool: The probability of the Federal Reserve keeping interest rates unchanged at its September meeting is currently priced at 67%, and the probability of a 25-basis-point rate hike is priced at 33%.
The probability of the Federal Reserve keeping interest rates unchanged at its December meeting is currently priced at 35%, and the probability of a 25-basis-point rate hike is priced at 65%.
In order to reprice those possibilities, investors are awaiting the release of the minutes from the Federal Reserve’s latest meeting at 18:00 GMT, which are expected to contain strong signals about the path of US interest rates this year.
Gold performance forecast
Here at FX News Today, we predict: If the Federal Reserve meeting minutes contain less aggressive comments than expected by the markets, the chances of a US interest rate hike this year will decrease, which will put more downward pressure on the US dollar and yield levels, which will favor gold prices rising again above $ 4,400 an ounce.
SPDR Fund
Holdings of gold at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by about 5.42 metric tons on Tuesday, bringing the total down to 1,025.24 metric tons, abandoning the 1,030.60 metric tons that was the highest level since May 28.
