The prospect of a Fed rate drop contributed to the strength of gold prices in the third session

 The prospect of a Fed rate drop contributed to the strength of gold prices in the third session

The prospect of a Fed rate drop contributed to the strength of gold prices in the third session

The benchmark yield on US 10-year bonds declined, while the dollar index dropped to a level close to a five-month low.

The CME FedWatch tool indicates that traders now factor in an 89% possibility of a rate reduction by the US Federal Reserve in March.

Tuesday saw a third consecutive session of gains in gold prices, driven by the US dollar's decline and a drop in Treasury yields due to anticipation that the Federal Reserve may cut interest rates in 2019.

After touching a peak of $2,070.39 in the previous session, spot gold increased 0.5% to $2,062.71 an ounce at 1224 GMT. US gold futures increased to $2,073.90, up 0.2%.

The day following Christmas saw little trading since a lot of markets were closed for public holidays. During the short week that followed, activity was predicted to remain low.

According to Han Tan, chief market analyst at Axinity, "the market expected the Fed to indeed lower the benchmark rates in the new year, encouraging gold to post sustained weekly gains."

"As long as the Fed can stick to its planned rate cuts for next year, spot gold should find plenty of reasons to stay supported above the psychologically significant $2,000 level."

According to data published on Friday, prices in the US decreased in November for the first time in over three and a half years, which further reduced inflation and increased forecasts for a Fed interest rate drop in March of next year.

The CME FedWatch tool indicates that traders now factor in an 89% possibility of a rate reduction by the US Federal Reserve in March.

The benchmark yield on US 10-year bonds declined, while the dollar index dropped to a level close to a five-month low.

Low US interest rates make dollar-denominated gold more appealing to people holding other currencies by weakening the US dollar and increasing the attraction of non-yielding bullion.

Spot silver increased 0.7% to $24.3402 an ounce in other precious metals, while palladium dropped 0.4% to $1,197.79 and platinum submerged 0.1% to $969.69.