Gold stumbles after hitting three-week high

Gold prices retreated on Thursday after reaching a more than three-week high earlier in the day. Spot gold was trading at $2,074.90 per ounce as of 10:45 GMT, having previously hit its highest level since early December.

The precious metal had climbed due to a weaker U.S. dollar and declining bond yields, as markets increasingly bet on rate cuts by the Federal Reserve in early 2024.

However, the lack of catalysts amid thin holiday liquidity kept gains in check. Gold’s next potential catalyst is likely to come from key economic data like manufacturing surveys and the January jobs report.

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Investors are now pricing in an 88% probability of a Fed rate reduction as soon as March, a stark reversal from a month ago. Lower rates reduce the opportunity cost of holding non-yielding assets like gold. Markets now await U.S. jobless claims data due later today for further clues on the central bank’s policy path.