Gold prices continued to rise in the trading session on Wednesday, marking the fifth consecutive rise session as oil prices remained at a low level, the USD weakened and the market reduced concerns about the possibility of the US Federal Reserve (Fed) raising interest rates in the near future.
The rise in gold takes place in the context of oil prices continuing to squeeze close to a three-month low. This development helps cool down concerns about inflation and reduce pressure on monetary policy.
Mr. Ilya Spivak - Head of Global Macroeconomics at Tastylive said that the drop in oil prices has contributed to reducing expectations of interest rate hikes.
The downward momentum of oil prices has helped ease interest rate hike pressure and weaken expectations that the Fed will continue to tighten monetary policy. However, the upward momentum of gold is showing signs of slowing down as the market turns its attention to the Fed's policy meeting," he said.
Investors are currently focused on interest rate decisions and statements from the Fed. The market is almost in agreement that the Fed will keep interest rates unchanged in this meeting.
This is also the first meeting of the US Federal Open Market Committee (FOMC) chaired by new Fed Chairman Kevin Warsh. Investors are closely monitoring signals related to interest rate prospects in the near future.
According to CME's FedWatch tool, the market currently only assesses about 59% of the Fed's ability to raise interest rates in December, significantly lower than nearly 70% recorded last week.
High interest rates are often detrimental to gold because precious metals do not yield yields, causing the cost of holding opportunities to increase.
However, many financial institutions still maintain a positive outlook for gold in the long term.
Westpac experts believe that gold demand from Asia and central bank purchases will continue to be an important support for the market.
Structural supporting factors for gold are still maintained, including stable demand from Asia and gold purchases by central banks to diversify reserves," Westpac's report said.
This view is also consistent with the latest survey by the World Gold Council (WGC), in which 45% of central banks surveyed said they plan to increase gold reserves in the next 12 months - the highest level since the survey was conducted.
On other precious metals markets, spot silver prices rose 0.3% to $70.38/ounce. Platinum prices rose 0.5% to $1,812.80/ounce, while palladium rose 0.3% to $1,355.65/ounce.
