Gold prices steadied in a tight range on Tuesday as optimism that the US central bank will not hike interest rates this month kept the dollar under pressure.
Spot gold held its ground at $1,960.89 per ounce. US gold futures edged 0.1 percent higher to $1,976.80.
The dollar index eased 0.1 percent, making gold a more favorable bet among overseas investors. The yield on 10-year Treasuries also retreated after weaker US services sector data on Monday.
“(However,) the Fed’s data-dependent stance will mean that rate expectations may continue to see huge swings due to its higher sensitivity to incoming economic data, with a key look-ahead being the US May CPI report next week,” said Yeap Jun Rong, a market analyst at IG.
A survey from the Institute for Supply Management showed the US services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, which could aid the Fed’s fight against inflation.
Lower interest rates tend to lift gold as it reduces the opportunity cost of holding the non-yielding asset.
“(But) the constantly-shifting narrative around how high the terminal rate will have to be and the timeline for rate cuts could challenge gold prices’ upside for now, until greater clarity is being presented on that front,” Jun Rong said.
