Gold prices posted rare gains on Tuesday, as precious metals received a boost from a sliding US dollar.
December gold futures rose $6.70, or 0.5%, to $1,263.30 a troy ounce, marking its second consecutive advance on the Comex division of the New York Mercantile Exchange. Tuesday’s settlement was also the highest since October 5.
Meanwhile, silver prices also rallied Tuesday. December silver contracts advanced 16 cents, or 0.9%, to $17.63 a troy ounce.
Precious metals have been ravaged by growing expectations the US Federal Reserve will raise interest rates in the coming months. Three central bankers voted in favour of raising interest rates at the September 20-21 Federal Open Market Committee (FOMC) meeting. Since then, gold prices have been on a sharp downward trajectory.
Growing rate-hike bets have fueled large gains in the US dollar, which only last week reached its highest level in seven months. The dollar has moderated against a basket of currencies this week, giving precious metals more room to recover.
Fed Fund futures, which are used to bet on monetary policy, imply a nearly 70% chance that the US central bank will raise rates at its meeting in December. According to analysts, a December rate rise is already somewhat factored into the price of gold already. This suggests the yellow metal may have already found its bottom near last week’s four-month lows.
Rate-watchers were closely monitoring the economic data on Tuesday. The Labor Department reported that US consumer prices rose 0.3% in September and were up 1.5% compared to a year ago, edging closer to the Fed’s target of 2%.