Gold prices held above the $2,100 level on Wednesday, near a record peak hit in the previous session, as hopes for U.S. rates easing by mid-year mount, while traders awaited remarks on the economy’s health from Federal Reserve Chair Jerome Powell.
Spot gold was steady at $2,127.39 per ounce, as of 0829 GMT. U.S. gold futures fell 0.3% to $2,135.30.
Spot prices hit a record peak of $2,141.59 per ounce on Tuesday, rallying for a fifth straight session.
Gold’s rally is sentiment driven, which was triggered by last week’s poor U.S. economic data that gave little more clarity for a June rate cut, Ajay Kedia, director at Kedia Commodities, Mumbai, said. Without other factors at play, such as dollar’s movement, or any surge in geopolitical tensions, gold could see profit taking, he said.
Spot gold’s 14-day relative strength index spiked to 78, much above the ‘overbought’ levels at 70.
“Extremely light positioning across listed financial gold products (futures/options, ETFs) and robust physical demand (EM CBs, bar/coin), suggest there is plenty of dry powder to test higher nominal prices in 2024,” Citi analysts wrote in a note.
Traders are weighing risks to the U.S. economic health in a high-interest rate environment and would be tuning into Powell’s first day of semi-annual congressional testimony for more clarity on the same.
Data on the U.S. labour market due this week will also be closely watched. Any downside surprise could help support gold.
Traders see a 57% chance for a 25-basis-point June Fed rate cut. Lower rates boost the appeal of non-yielding bullion.
