Gold prices continued to rise on Tuesday. The precious metal extended the gains it recorded during the previous trading session. However, Tuesday’s increase remained smaller than Monday’s sharp rally.
After Asian markets opened, gold prices climbed by nearly $20. One ounce of gold traded at around $4,324. Investors continued to buy gold because of economic uncertainty and changing expectations for U.S. monetary policy.
On Monday, U.S. President Donald Trump announced a preliminary agreement between the United States and Iran. The deal aims to reduce tensions in the Gulf region. However, officials have not released the details of the agreement. Both sides also said that a permanent ceasefire will require further negotiations.
Edward Meir, a financial markets analyst at Marex, said gold has performed strongly since late last week. He added that market optimism could continue for several more days. According to Meir, positive developments may push gold prices to new record highs.
Meanwhile, the U.S. dollar remained near its lowest level in the past ten days. A weaker dollar often supports gold prices. It makes the precious metal cheaper for investors who hold other currencies.
Investors are also waiting for policy decisions and comments from the U.S. central bank on Wednesday. This will be the first meeting under the leadership of Kevin Warsh. Most analysts expect interest rates to remain unchanged.
Meir said financial markets do not expect an interest rate cut this year. However, a signal of at least one rate cut before the end of the year could weaken the dollar further. As a result, gold prices could rise again. In contrast, a tougher position on interest rates could put pressure on the precious metal.
Traders have also lowered their expectations for a U.S. interest rate increase in December. The probability has fallen to 57%. Last week, it stood at nearly 70%.
In another bullish sign, American banking giant Citibank raised its three-month forecast for gold prices by $500. The bank now expects gold to reach $4,500 per ounce within the next three months.
