Gold prices clawed their way back above the key $2,000 level on Tuesday as the dollar and bond yields retreated, while investors contemplate whether the U.S. Federal Reserve will pause its rate-hike cycle after a widely anticipated increase in May.
Spot gold was up 0.7% at $2,008.55 per ounce, as of 1025 a.m. EDT (1425 GMT), after hitting a two-week low of $1,981.19 in the previous session. U.S. gold futures were also up 0.6% at $2,020.10.
The dollar index , making greenback-priced bullion more attractive to overseas buyers, while benchmark U.S. Treasury yields dipped.
“What gold traders really care about is how fast do we get the (rate) cuts. The market has already priced for cutting cycle to begin even as early as this summer,” said Daniel Ghali, commodity strategist at TD Securities.
The CME FedWatch tool shows that markets are pricing in an 87% chance of a 25-basis-point hike at its May 2-3 meeting, followed by 2-in-3 odds of a pause in June.
Higher interest rates to combat rising prices tend to lower demand for the zero-yielding metal, countering its customary role as an inflation hedge.
St. Louis Federal Reserve President James Bullard said the U.S. Fed should continue raising rates as recent data shows inflation remains persistent with the broader economy set to keep growing, even if slowly.
Markets will focus on more comments from Fed officials this week before they enter a blackout period from April 22, ahead of the May meeting.
Learn more: Reuters