WEB DESK: Gold prices bounced back on Tuesday, climbing above the key $4,000-per-ounce mark as investors regained confidence on expectations of further interest rate cuts by the US Federal Reserve and a softer dollar. The recovery came after the precious metal suffered its sharpest fall in over two weeks a day earlier.
By 0141 GMT, spot gold had risen 0.7 percent to $4,009.39 per ounce, recovering from Monday’s more than 3 percent plunge that had dragged it to its lowest level since October 10. US gold futures for December delivery edged up 0.1 percent to $4,022.10 per ounce.
Tim Waterer, chief market analyst at KCM Trade, said the recent dip in prices had drawn fresh buying interest from investors. “Buyers who were waiting on the sidelines for gold are now being tempted into taking positions at these price levels. Also, we are seeing a bit of softness from the dollar, which is giving gold a reprieve,” he said.
The US dollar index slipped 0.1 percent against major currencies, making gold more affordable for investors holding other currencies.
Trade talks offer mixed signals
Gold’s rebound came despite renewed optimism over US-China trade relations. Over the weekend, senior economic officials from both countries reportedly worked out a draft framework for a potential trade deal, which is expected to be reviewed by President Joe Biden and Chinese President Xi Jinping later this week.
Adding to the geopolitical backdrop, President Biden, during the first leg of his five-day Asia tour in Malaysia, announced several trade and critical mineral deals with four Southeast Asian countries.
While easing trade tensions could reduce demand for safe-haven assets like gold, analysts said the metal is still supported by expectations that the Fed will continue to loosen its monetary policy to bolster growth. Lower interest rates tend to make gold more attractive by reducing the opportunity cost of holding the non-yielding asset.
With markets closely watching the upcoming Fed meeting and developments in US-China relations, traders say gold could continue to see wide swings. However, many investors still view it as a reliable hedge in a period of economic and political uncertainty.