Gold prices reached their highest levels in nearly seven months on Wednesday, driven by a decline in the dollar and U.S. bond yields, as investor confidence grew that the U.S. Federal Reserve will lower interest rates in the first half of next year. As of 06:32 GMT, spot gold rose 0.2% to $2044.69 per ounce, after hitting its highest level since May 5. U.S. gold futures for December delivery increased 0.3% to $2045.30 per ounce.
The CME Group's FedWatch tool showed that traders now expect a greater than 70% likelihood that the Federal Reserve will decide to cut rates in May, up from a 50% chance reported on Tuesday. Lower interest rates reduce the opportunity cost of holding non-yielding gold.
Investor attention is now focused on the revised U.S. GDP numbers for the third quarter, set to be released today, and the core personal consumption expenditure data—a key inflation measure preferred by the central bank—tomorrow, Thursday.
The dollar index fell to its lowest level in over three months against its rivals, making gold less expensive for holders of other currencies, and the index is on track to record its worst monthly performance since last year. The yield on 10-year Treasury bonds dropped to its lowest level in more than two months at 4.2629%.
Among other precious metals, spot silver fell 0.2% to $24.96 per ounce, platinum decreased 0.3% to $936.78, while palladium rose 0.2% to $1056.62 per ounce.
