Gold Climbs Back Above $4,900 as Buyers Return Before Fed Minutes

TLDR

Table of Contents

Gold bounced back above $4,900 after falling more than 3% over two sessions
Dip-buyers moved in during thin Lunar New Year trading
U.S.-Iran talks progress cut safe-haven demand and pushed gold lower Tuesday
Fed minutes from January meeting released Wednesday; officials divided on rate cuts
Goldman Sachs, BNP Paribas, and Deutsche Bank all expect gold to trend higher

Gold recovered above $4,900 an ounce on Wednesday after two days of steep losses. Buyers took advantage of lower prices while traders waited for the Federal Reserve’s January meeting minutes.

Spot gold rose 0.8% to $4,917.45 an ounce in London morning trading. U.S. Gold Futures gained 0.5% to $4,931.91 an ounce.

The metal had fallen more than 3% across the two previous sessions. That selloff followed a record high of $5,595 an ounce hit in late January, driven by a wave of speculative buying.

After that peak, gold dropped sharply to near $4,400 in just two sessions. It has since recovered roughly half of those losses, though trading remains choppy.

BMO Capital Markets analysts said investors could expect a “soft patch” for precious metals during the Lunar New Year period. Much of Asia was offline Wednesday, keeping trading volumes low.

Iran Talks and a Stronger Dollar Pressured Gold

Gold fell on Tuesday after the U.S. and Iran reached an understanding on the main “guiding principles” of ongoing talks. Signs of diplomatic progress reduced demand for gold as a safe-haven asset.

A stronger U.S. dollar added to the pressure. When the dollar rises, gold becomes more expensive for buyers using other currencies, which typically weighs on demand.

The U.S. Dollar Index edged up again Wednesday after gaining 0.3% the day before. Analysts at ING described the recent pullback as “corrective” and said gold should find firmer support once Asian markets return to normal.

Fed Rate Outlook Remains Key for Gold Prices

Investors were focused on the Fed’s January meeting minutes, due Wednesday afternoon. The release could give markets a clearer picture of when and how much the Fed might cut rates.

Fed Governor Michael Barr said Tuesday that rates should stay on hold “for some time.” He said more evidence is needed that inflation is moving toward the Fed’s 2% target.

Chicago Fed President Austan Goolsbee struck a more open tone. He said rate cuts remain possible in 2025 if inflation continues its downward path.

Gold pays no interest, so it tends to rise when rate cut expectations increase and fall when they fade. The metal briefly rallied last Friday after soft inflation data lifted hopes for easing.

Traders are also watching Friday’s PCE price index report, the Fed’s preferred inflation measure, which could further shift rate expectations.

Major banks remain broadly positive on gold. Goldman Sachs, BNP Paribas, and Deutsche Bank all forecast that the longer-term upward trend will resume, pointing to geopolitical tensions and uncertainty around Fed independence as ongoing supports.

Silver rose 3.1% to $75.78 an ounce. Platinum gained 1.4%, palladium climbed 1.8%, and copper futures rose 1.2% on the London Metal Exchange.

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