Gold Recaptures $5,000 Per Ounce Amid Focus on Interest Rates
Gold advanced back to approximately US$5,000 an ounce after a two per cent jump on Wednesday, with some Asian markets closed for the Lunar New Year break. Traders are closely watching the United States Federal Reserve's next moves on interest rates, which are expected to influence bullion's trajectory in the coming weeks.
Market Movements and Volatility
Bullion climbed as much as 0.9 per cent on Thursday, while silver gained up to three per cent. Volatility in both precious metals has been exceptionally high in recent months, particularly following a historic rout at the end of January. Spot gold increased by 0.5 per cent to US$5,004.32 an ounce as of 9:50 a.m. in London, with silver rising two per cent to US$78.78. Platinum remained largely unchanged, and palladium edged lower.
Federal Reserve Policy and Economic Indicators
A key focus for gold's next decisive move is the path of U.S. interest rates. Fed officials appeared surprisingly wary of cutting rates during their meeting last month, according to minutes from the US central bank's Jan. 27-28 policy meeting released on Wednesday. This stance could put the central bank at odds with U.S. President Donald Trump, who has advocated for lower borrowing costs to support economic growth. Lower interest rates typically act as a tailwind for non-yielding assets like gold.
The dollar mostly held gains after rising on Wednesday, supported by data highlighting a resilient American economy. U.S. industrial production rose last month by the most in nearly a year, while a separate report showed orders for core capital goods increased more than expected in December.
Bank Forecasts and Geopolitical Factors
Major banks, including BNP Paribas SA, Deutsche Bank AG, and Goldman Sachs Group Inc., have forecast that gold will resume an upward trend. Many factors that underpinned a multiyear rally remain intact, such as concerns over the Fed's independence and ongoing geopolitical tensions. Traders are monitoring developments in the Middle East, where nuclear talks between the U.S. and Iran have so far been inconclusive. After negotiations in Geneva this week, a U.S. official stated that Tehran's officials would return in two weeks with detailed proposals to address gaps between the two sides.
Additionally, a report by U.S.-based news website Axios indicated that any potential U.S. military operation in the region would likely be a weeks-long campaign, adding to market uncertainty. These geopolitical risks have historically supported bullion prices as investors seek safe-haven assets during times of instability.
In summary, gold's resurgence to US$5,000 an ounce reflects a complex interplay of monetary policy, economic data, and global tensions, with traders poised for further volatility in the precious metals market.
