TLDR
- Gold rebounded above $4,900 after dropping over 3% in two sessions, with dip-buyers stepping in
- Silver jumped over 3% to $75.78, platinum and palladium also gained
- U.S.-Iran talks progress reduced safe-haven demand, briefly pressuring gold
- Fed minutes from January meeting due Wednesday; Fed officials split on rate cut timing
- Banks including Goldman Sachs, BNP Paribas, and Deutsche Bank expect gold’s upward trend to resume
Gold climbed back above $4,900 an ounce on Wednesday after two days of losses. Dip-buyers moved in as traders waited for the release of minutes from the Federal Reserve’s January meeting.
Spot gold rose 0.8% to $4,917.45 an ounce by late morning in London. U.S. Gold Futures were up 0.5% to $4,931.91 an ounce.
Gold had lost more than 3% over the previous two sessions. That followed a record high above $5,595 an ounce in late January.
The January peak came after a surge in speculative buying. The market then dropped sharply, falling close to $4,400 in just two sessions.
Trading has been choppy since that drop. Analysts at BMO Capital Markets said investors could expect a “soft patch” for precious metals during the Lunar New Year holiday period.
Much of Asia was offline Wednesday due to the holiday. That kept trading volumes thin.
U.S.-Iran Talks Weighed on Gold
Gold’s decline on Tuesday was partly tied to progress in U.S.-Iran negotiations. The two sides reached an understanding on the main “guiding principles” of talks, which reduced demand for gold as a safe-haven asset.
A stronger U.S. dollar also added pressure. A rising dollar makes gold more expensive for buyers using other currencies.
Analysts at ING called the recent drop “corrective.” They said gold should find stronger support once Asian liquidity returns to normal.
Fed Policy in Focus
Investors were watching closely for the Fed’s January meeting minutes, due later Wednesday. The minutes could give clues on the pace of future interest rate cuts.
Fed Governor Michael Barr said Tuesday that rates should stay steady “for some time.” He said officials need more evidence that inflation is heading toward the 2% target.
Fed Bank of Chicago President Austan Goolsbee took a different tone. He said more cuts are possible this year if inflation keeps moving toward the target.
Higher interest rates tend to weigh on gold, which pays no yield. Expectations of rate cuts generally support gold prices.
Gold briefly rallied last Friday after mild inflation data raised the case for rate cuts. Traders are also watching the PCE price index report due Friday, the Fed’s preferred inflation measure.
Several major banks still expect gold to trend higher. Goldman Sachs, BNP Paribas, and Deutsche Bank all forecast prices will resume their climb, citing geopolitical tensions and concerns over Fed independence.
Silver rose 3.1% to $75.78 an ounce. Platinum gained 1.4% and palladium was up 1.8%.
Copper also moved higher. LME Benchmark Copper Futures rose 1.2% to $12,747.20 a ton.
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