Gold took a breather after hitting another record high on Wednesday as rising tensions in the Middle East and hopes of a U.S. Federal Reserve interest rate cut continued to drive investors to safe havens.
Spot gold was down 0.3% at $2,272.79 an ounce, after hitting a record high of $2,288.09 in the previous session, by midday on Wednesday. Analysts attributed the slight decline to a rise in US Treasury yields.
U.S. gold futures rose 0.5 percent to $2,293.20.
“The most important factor driving gold prices higher is expectations of a rate hike from the Fed and rising market sentiment,” said Julius Baer analyst Carsten Menke.
“We are very cautious on gold and believe there is more potential for a downside move than at current levels. We also recognize that short-term price risks are to the upside, given bullish market sentiment,” Carsten Menke pointed out.
Rising geopolitical risk and expectations of a rate cut have boosted gold prices, with the precious metal posting 10% gains since the start of the year.
“Gold seems to be turning every market development higher,” said Alexander Zumpfe, precious metals trader at Heraeus.
Federal Reserve policymakers believe it would be “reasonable” to cut US interest rates three times this year.
“The US economy is surprising with its strong performance, which will lead to the first interest rate cut in June and a negative impact on gold prices, but the precious metal is holding its value,” Zumpfe said.
Investors are now awaiting comments from Fed Chairman Jerome Powell in the coming hours on when the central bank will make its first interest rate cut.
Gold gains when interest rates are low, which lowers the opportunity cost of holding nonperforming gold.
