Gold stuck in tight range as rate outlook clouds direction

Precious metal weighed down by mixed signals on US interest rates.

Gold prices remained rangebound on Wednesday morning, with the precious metal trading at $2,314.19 an ounce amid conflicting forces influencing its trajectory.

While escalating tensions between Israel and Hamas provided some safe-haven demand support for gold this week, this was offset by pressure from renewed fears over the path of US interest rates.

Comments from several Federal Reserve officials, including Minneapolis Fed President Neel Kashkari on Tuesday, led markets to second-guess expectations for rate cuts in 2024. Kashkari stated that sticky inflation remains a key concern for the central bank.

This pushed back against rising speculation of an imminent rate reduction after last week’s weak payrolls data had boosted bets on a September rate cut.

The prospect of higher rates for longer weighed on gold prices, as it increases the opportunity cost of holding the non-yielding asset. Conversely, lower rates would bolster the metal’s appeal as a hedge against inflation and economic risks.

With no major economic data due on Wednesday, gold prices are confined to a narrow range as investors consider the contrasting factors impacting the metal’s direction.

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