Gold prices inched higher on Thursday as investors weighed the chances of the U.S. Federal Reserve slowing its pace of interest rate hikes.
Traders are mostly pricing in a 25-basis point rate hike at the Fed's Jan. 31-Feb. 1 meeting. Last year, the U.S. central bank slowed its pace of hikes to 50 bps in December after four straight 75-bp increases.FEDWATCH
Markets still see a 25-bp hike in February and rate cuts from September, and gold is enjoying the perceived less hawkish Fed, said Matt Simpson, a senior market analyst at City Index. Lower interest rates tend to boost bullion's appeal as they decrease the opportunity cost of holding the non-yielding asset.
"If gold can hold above $1,895, then prices will hold within the $1,900–$1,920 range, whereas a break below $1,895 signals a retracement against its bullish trend, ahead of a break above $1,930," Simpson said.
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