Gold Rebounds From One-Week Low Ahead of Fed Minutes
Gold prices rose on Wednesday (February 18th), bouncing off a one-week low reached in the previous session, as investors awaited fresh clues regarding the direction of Federal Reserve monetary policy. This movement occurred after gold was pressured by improving market risk appetite.
Spot gold rose 2% to $4,975.09 per ounce, while US gold futures rose 1.5% to $4,980.24/oz. This increase marked a recovery after Tuesday's sharp decline.
In Tuesday's trading, gold fell more than 2% as risk appetite increased following news of progress in US-Iran negotiations. The two sides reportedly reached an understanding on key "guiding principles" in the talks, temporarily weakening demand for safe-haven assets like gold.
Pressure on gold was also exacerbated by the strengthening US dollar. The dollar index (DXY) edged up on Wednesday after strengthening 0.3% on Tuesday, making gold more expensive for holders of other currencies. At the same time, expectations of an imminent US interest rate cut also eased, adding to the burden on the precious metal.
ING analysts believe the recent weakness is more of a correction, and gold has the potential to find support as liquidity in Asia returns to normal, while macroeconomic uncertainty remains high. They believe fundamental factors remain constructive enough that price weakness is likely to stimulate renewed buying interest.
Investors are now focused on the release of the FOMC Meeting Minutes from the January policy meeting, which could provide signals regarding the timing and scale of monetary easing. The market is also awaiting Friday's PCE inflation report (the Fed's favorite indicator), which could potentially shape interest rate expectations.
In other metals markets, silver jumped 5.2% to $77.375/oz, platinum rose 3% to $2,079.10/oz, while copper also strengthened.
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