Gold maintained its gains at close to $2,020 an ounce on Wednesday despite a rebounding dollar, as recent US economic data fanned fears of a slowdown and spurred bets the Federal Reserve may ease up on rate hikes.
Spot gold stayed flat at $2,020.72 per ounce by 1:40 p.m. ET, near its highest level in a year. The precious metal is now roughly $50 away from trading at an all-time high. US gold futures also had minimal movement, trading at $2,037.70 per ounce.
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Gold raced past the key $2,000 level on Tuesday after a sharp drop in US job openings in February, adding on to gains from earlier this week after an OPEC-led spike in oil triggered worries of another run higher in inflation.
Gold could sustain gains above this level as economic worries grow, some analysts said. UBS forecasts gold prices to surpass their all-time high and reach $2,200 by the end of March 2024.
Analysts at Citi are forecasting gold prices to remain strong in the short-term with an upside of $2,300 on the back of several macro drivers, including deflationary pressures and increased likelihood of a recession.
Commodity research consultants at CPM Group recently predicted that gold demand will stay elevated due to the economic conditions reminiscent of the outset of a recession. “Our expectation is that a recession will likely occur in 2024,“ said CPM managing partner Jeffrey Christian in a webcast.
Softer-than-expected growth in private payrolls in March also exacerbated worries over the economic toll from the Fed’s rapid rate hikes. Bullion found additional support from a subdued dollar overall, and a retreat in US yields.
“That downbeat economic data we got yesterday put a little risk aversion back into the marketplace and that’s beneficial for safe-haven gold,” Jim Wyckoff, senior analyst at Kitco Metals, told Reuters.
Traders now see a 60% chance of US rate hikes pausing in May, brightening the outlook for gold and its status as the preferred inflation hedge.
But Carsten Menke, head of Next Generation Research at Julius Baer, warned that a US recession might still be avoided while a “rapid reversal” of Fed policy was unlikely.
(With files from Reuters)