Gold Prices Soar Amid Low Market Liquidity

Gold prices experienced a notable rise on Wednesday, overcoming a steep decline from the previous day that brought them to a one-week low. The increase was observed as markets turned their focus to the upcoming release of the Federal Reserve's January meeting minutes, seeking guidance on future rate changes. Spot gold advanced 1.1% to $4,931.61 per ounce, while U.S. gold futures for April showed a 0.9% gain, reaching $4,950.20.

Ajay Kedia, director at Kedia Commodities in Mumbai, described the bounce as technical, following Tuesday's price fall induced by easing geopolitical tensions. Investors are keenly awaiting the Fed's January minutes for insights. Furthermore, the U.S. Personal Consumption Expenditures report for December is set to release on Friday, providing additional clues on rate trajectories. Currently, market forecasts suggest a rate cut in June, in line with the CME's FedWatch Tool predictions.

The precious metal often fares well in low-interest-rate environments, and the Federal Reserve might approve further rate reductions if inflation dips toward its 2% target, according to Chicago Fed President Austan Goolsbee. However, Fed Governor Michael Barr expressed caution, indicating potential future cuts depend on inflation risk management. Meanwhile, geopolitical talks are underway, with former President Donald Trump urging rapid resolutions in Ukraine-Russia peace negotiations mediated by the U.S.