This stalled economic growth preceded the publication of important jobs data.
Lower US yields tend to support precious metals such as gold. Reduced yields reduce the cost of non-yielding investments.
Dollar to dip and macro outlook
Also, changes in macroeconomic expectations, like slower growth and looser monetary policies, often accompanied by lower yields boost precious metals.
In the Asian session of Wednesday, gold was trading above $5,050.
The US Dollar has weakened following the Fed’s dovish signal. This is driving the rally.
This is also seen as an important factor that acts as a positive tailwind for non-yielding gold. The underlying bullish mood could limit the rise of the safe-haven metal, Haresh Menghani said.
Bullish traders may also choose to wait until the US Nonfarm Payrolls report is released before attempting any additional gains.
The COMEX Gold contract is currently at $5,081,96 an ounce. This represents a 1% increase, and silver has increased by 2.3% to $82.205 per ounce.
Data on economic data
According to the US Census Bureau’s report released on Tuesday, retail sales in the US were unchanged in December.
The result of this month was lower than the 0.4% expected increase, and it followed up on a 0.6% gain in November.
These data, combined with the evidence that the US labor market is weakening, have led many economists to reduce their forecasts of economic growth for the fourth-quarter, which increases the probability of more interest rate reductions by the Fed.
Money markets are pricing 58 basis point (bps) in Fed easement through 2026.
Fed Concerns
Recently, the issue of independence was raised by Federal Reserve.
On Saturday, US President Donald Trump added fuel to these fears by suggesting that he would sue Kevin Warsh, his nominee for Fed Chair, if Warsh refused to agree on lowering interest rates.
Fed Governor Stephan Miran also added to the discussion by stating that total central bank autonomy is not possible.
Gold’s upward trend is expected to continue despite the hawkish comments of regional Fed presidents Beth Hammack and Lorie Logan.
UBS analysts noted that Kevin Warsh has in the past advocated lower interest rates, even though he supports shrinking the Federal Reserve balance sheet.
In a recent note, they stated that “this should support the gold price even if the longer-term concerns about the dollar’s value abate.”
The lower opportunity costs of gold ETFs should support the demand from investors for the metal.
Other drivers of gold’s rally, such as the robust demand by central banks, remain in place.
Beth Hammack, the Cleveland Fed president, stated that the Fed’s current target rate was near neutral.
The central bank’s position is good, she said. She suggested that policy may be on hold for “quite some time”, due to the persistently high rate of inflation and tariff problems.
The upside potential of gold
Experts believe that gold must surpass $5,090 an ounce to continue its upward trend. Prices are currently just below the $5,090 per ounce mark.
UBS analysts revised their prediction, predicting now that gold would close the year around $5,900 per ounce. They noted that this specific projection “feeds our broader view of commodities.”
In 2026 we expect commodities to play an increasingly important role in investment portfolios. Returns will be driven by geopolitical risk, long-term trends, supply-demand imbalances and other factors.
Source: FXStreet
They said that investors who have large gold positions with unrealised gains on their portfolios should diversify.
According to UBS analyst, by adding commodities like aluminum, copper and other agricultural products, investors could potentially stabilize their portfolios and introduce new sources for return.
The post Gold, Silver to rise due to falling yields and weak data appeared first on COINPAPER.COM
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