The gold price trudged a bit higher on Tuesday, supported by hopes that the United States Federal Reserve could soon put an end to the rate hike cycle. The slip in dollar rates during previous sessions also helped fuel this move upwards for gold rates in the global market.
Spot gold prices in the market were up by 0.2 percent and reached $1,246.62 per ounce. Gold rates had previously touched the highest in five months, $1,250.55, in their previous session. United States gold futures also jumped up by a similar 0.2 percent to reach rates of $1,251.4 per ounce.
“Weakening U.S. dollar outlook and very dovish pivots from the Fed, a lot of uncertainty boxed around equity markets… It can still turn quite negative, so this is why gold remains a good hedge against a lot of market risks,” said Stephen Innes, who is the trading head for APAC at OANDA in Singapore.
“I am very bullish on gold in this setup into 2019,” he further added.
The dollar index, which is a measure of the dollar’s performance against a group of six major peer currencies, edged even lower after rallying in the previous sessions. The decrease in dollar rates can be linked to the delayed vote on the Brexit deal.
Investors have their eyes currently fixated on the December 18th and 19th policy meeting set by United States Federal Reserves. It is expected that the Fed will discuss important issues, such as a potential rate hike in the meeting later this month.
The Fed had previously mentioned that they plan to raise interest rates going into 2019 as well. These plans were met with increased skepticism by traders setting in Wall Street on Monday. The impact of the announcement could be seen with one bank walking back on a hawkish prediction and futures trading going on a pause. The interest rates for the dollar, set by the Fed, have a major impact on all kinds of investments and equities.
“Markets still see an increase in December but even one further hike in 2019 is now being questioned whereas two of them were fully priced in just a month ago,” said Ilya Spivak, who is a currency strategist for DailyFX.
Higher interest rates tend to raise the opportunity cost of investing in bullion like gold, which yield a lower return. Non-yielding investments, hence, are directly impacted by a raise in the interest rates for dollar.
“Technically, the break of $1,250 will be very significant… $1,250 is a very key point and on the bottom it’s $1,240,” OANDA’s Innes said.
Among other precious metals within the market, silver rates fell further by 0.3 percent and reached the rate of $14.57 per ounce. Palladium, which hit record highs recently, improved by 0.3 percent to reach rates of $1,221.35.
Platinum prices were down by some 0.4 percent to slip to $782.10 per ounce. The rates for Platinum had previously slipped to their lowest in 3 months, as they dropped to $773.50 in the previous session of trading.