Gold nears one-week low amidst strong USD and higher bond yields

Shafaq News / Gold prices hovered near a one-week low on Thursday, pressured by a firmer US dollar and higher bond yields following strong business activity data, while investors awaited US GDP numbers and the European Central Bank's policy meeting later in the day.

Spot gold rose 0.2% to $2,015.83 per ounce by 04:24 GMT. US gold futures were unchanged at $2,015.80.

Bullion hit its lowest level in nearly a week on Wednesday after data suggested that the US economy kicked off 2024 on a strong note, with business activity picking up in January and inflation appearing to abate.

"The US economy keeps defying the doom and gloom and that's allowed the markets to price out policy easing and the risk of a recession," said Kyle Rodda, a financial market analyst at Capital.com.

The dollar index rose 0.1% to hover near a six-week high, making greenback-priced gold less attractive to other currency holders, while yields on benchmark US 10-year Treasury notes were not far from a more than one-month high of 4.1980% touched last week.

Given that there's still a chance of March rate cut implied in money markets, strong data over the next few weeks and a likely push back from the Fed at the end of its January policy meeting will make gold vulnerable to further downside, said Rodda.

Markets are currently pricing in a 43% chance of a Fed rate cut in March. However, those expectations largely have been deferred to May with an 88% probability of policy easing.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Investors are now awaiting the first reading of fourth-quarter US GDP due at 13:30 GMT, European Central Bank policy decision at 15:15 GMT, and the personal consumption expenditure data on Friday.

Spot silver rose 0.4% to $22.76 per ounce, platinum climbed 0.3% $901.53, and palladium gained 0.1% to $964.07.