Gold prices eased on Tuesday as the dollar regained some ground, but bullion’s losses were capped by expectations that the U.S. central bank may hit pause on its rapid rate hike trajectory.
Spot gold fell 0.3% to $1,644.56 per ounce by 1144 GMT, while U.S. gold futures slipped 0.3% to $1,648.50.
Expectations of a less hawkish U.S. Federal Reserve had pressured the dollar, but the greenback is now slowly climbing back up, driving gold in the opposite direction, said Ricardo Evangelista, senior analyst at ActivTrades.
Gold is likely to hold a relatively narrow range as the dollar is also expected to stabilize as the next Federal Reserve meeting approaches, Evangelista added.
The dollar index found some footing due to a plunge in China’s yuan, recovering slightly from a dip to its lowest since Oct. 6 in the previous session.
Gains in the currency make bullion unattractive for overseas buyers.
Meanwhile, speculation grew about a potentially more dovish Fed despite U.S. inflation remaining hot. Higher interest rates increase the opportunity cost of holding zero-yield gold.
However, the change in Chinese political dynamics could further destabilize the international order in the months ahead and this may contribute to a decrease in global risk appetite and benefit gold, ActivTrades’ Evangelista added.
Uncertainty over whether President Xi Jinping’s new leadership team would prioritize economic growth in China rattled Asian equities.
Gold is finding some “relative stability above $1,600,” said Clifford Bennett, chief economist at ACY Securities.
Should pressures from the dollar and some sovereign selling dissipate over coming months, gold could move significantly higher towards $1,850-$2,200 over much of 2023, Bennett added.
Meanwhile, data showed top consumer China’s net gold imports via Hong Kong in September fell by 50% from the previous month.
Elsewhere, spot silver fell 1.9% to $18.9044 per ounce, platinum dropped 1.4% to $911.81, and palladium shed 0.3% to $1,961.68.