By Yara Abi Farraj

Gold prices decline but hold above $2,100, near record high

Traders eye Fed Chair Powell's testimony for economic clarity

Lower interest rates boost the appeal of non-yielding bullion, thus supporting gold prices

Gold prices saw a slight decline but continued to hover above the $2,100 level on Wednesday, maintaining their strength near a record peak reached in the previous session.

Spot gold saw a slight decline of 0.04 percent to $2,127.23 per ounce, while U.S. gold futures fell 0.25 percent to $2,136.65. The precious metal hit a record peak of $2,141.59 per ounce overnight on Tuesday, marking its fifth consecutive session of gains.

In Saudi Arabia, gold prices saw an increase. Twenty-four-carat gold was priced at SAR278 per gram, a SAR2 increase. Meanwhile, 22-carat stood at SAR256 per gram, a SAR1 increase.

Sentiment-driven rally

The recent rally in gold prices has been largely sentiment-driven, with hopes for U.S. interest rate cuts by mid-year gaining traction among traders. Last week’s disappointing U.S. economic data has fueled expectations for a rate cut in June. However, analysts cautioned that gold prices could lose their upward momentum without other supporting factors such as movements in the dollar or geopolitical tensions, potentially leading to profit-taking.

Focus on Powell’s testimony

Traders are closely monitoring Federal Reserve Chair Jerome Powell’s remarks on the economy’s health during his semi-annual congressional testimony. With concerns about the U.S. economic outlook in a high-interest rate environment, Powell’s insights could provide clarity on the likelihood of interest rate cuts. Traders see a 71 percent chance for a June interest rate cut. Lower interest rates boost the appeal of non-yielding bullion, thus supporting gold prices. Recent data showing a slowdown in U.S. services industry growth and a drop in new orders for U.S.-manufactured goods have added to the uncertainty. Traders will also closely watch U.S. labor market data this week, thus any downside surprise could help support gold prices.

Central bank gold purchases

Experts highlighted the significant increase in central bank gold purchases over the past two years. With central banks buying more than 1,000 tons of gold annually, compared to the historic average of 300 tons, experts noted that this trend has compensated for the decline in retail and ETF demand for gold.

Read: Gold prices hover near 3-month high on cautious investor sentiment

Other precious metals

Contrary to gold prices, spot platinum rose 0.4 percent to $884.16 per ounce, while palladium gained over 1 percent to $958.20 per ounce. However, silver prices dipped by 0.3 percent to $23.63 per ounce, reflecting mixed dynamics within the broader metals sector.

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