Gold prices retreated on Tuesday from an eight-month high in the previous session on hopes that the U.S. Federal Reserve will take a less aggressive approach to future rate hikes.
Spot gold was down 0.4% at $1,910.60 an ounce by 11:01 a.m. ET (1601 GMT), after hitting its highest level since late April on Monday. U.S. gold futures were down 0.5 percent at $1,913.00.
The US dollar index stopped its slide and held near 102.340. A stronger dollar makes gold more expensive for other currency holders.
“We view this more as a slight reversal in our sideways-to-higher trend. We believe the combination of a weaker dollar and steady inflation concerns continues to support our underlying bullish environment,” said David Meger, director of metals trading at High Ridge Futures.
With lower interest rates translating into smaller yields on interest-bearing assets like government bonds, investors may prefer zero-yielding gold.
Traders expect a 90.6% chance of a 25 basis point rate hike by the Fed in February and see rates peaking at 4.94% in June, while most Fed officials see rates landing north of 5% next year.
The US central bank raised interest rates by 50 basis points in December after four consecutive 75 basis point hikes.
Meanwhile, China saw economic growth fall in 2022, but World Economic Forum officials said the country’s reopening could drive global growth beyond expectations.
Gold markets in China usually rise ahead of the Lunar New Year holidays, which start on January 21.
“We expect gold prices to hover around $1,950/oz in 2023,” Goldman Sachs said in a Friday note.
“Expect China’s reopening and increased central bank purchases to support gold prices in 2023, relative to 2022 levels.”
Elsewhere, spot silver fell nearly 2% to $23.93 an ounce, platinum fell 1.7% to $1,044.63 and palladium fell 1.9% to $1,716.97.