Gold falls as dovish Fed predictions are tempered by a strong dollar

16 Nov 2023 , 09:34 AM

Early on Thursday in Asian trading hours, gold prices remained unchanged as the dollar strengthened following robust retail sales data in the United States, counteracting optimism around the conclusion of the Federal Reserve’s tightening cycle.

Spot gold was slightly changed at $1,958.79 per ounce. US gold futures decreased by 0.1% to $1,961.70.

After rising again during the night, the dollar maintained its value as optimistic U.S. economic statistics cast doubt on the Fed’s timeline for interest rate reductions.

October saw the largest decline in U.S. producer prices in three and a half years due to a steep decline in gasoline costs, which is the most recent sign that inflationary pressures are abating.

In October, U.S. retail sales dropped for the first time in seven months, indicating a slowdown in demand at the beginning of the fourth quarter and reinforcing views that the Fed will stop raising interest rates.

According to statistics released on Tuesday, headline consumer prices in the United States fell in October despite forecasts of a 0.1% increase. At 0.2%, core CPI likewise fell short of the forecasted 0.3%.

 In a Financial Times interview on Wednesday, San Francisco Fed President Mary Daly cautioned against prematurely ending the rate-rising cycle.

According to the CME FedWatch tool, traders generally anticipate that the Fed will keep interest rates constant in December and have bet that it will begin reducing them by May.

Holding gold has a lower opportunity cost when interest rates are lower.

Spot platinum dropped 0.3% to $893.37 while silver declined 0.2% to $23.39 per ounce. An ounce of palladium was valued at $1,031.40.

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