Gold Loses Shine as Rate Cut Hopes Fade

23 May 2024 , 08:43 AM

Following a recent spike that saw gold prices drop more than 1% in the previous session, traders began to reduce their hopes that the U.S. Federal Reserve will cut rates this year, leaving gold prices listless on Thursday.

Spot gold remained steady at $2,377.48 an ounce. On Monday, gold reached a record high of 2,449.89. At $2,378.20, gold futures were down 0.6%.

The U.S. central bank’s April 30-May 1 meeting minutes reveal that Federal Reserve officials said it would take longer than expected to feel more confident about inflation reaching 2%.

Although recent statistics indicated that U.S. inflation had resumed its declining trend, a number of Fed officials decided against raising rates too quickly while simultaneously maintaining caution.

Traders’ bets indicated a rising scepticism regarding the likelihood of several rate cuts by the Fed in 2024.

Although gold is seen as an inflation hedge, owning non-yielding gold has a greater opportunity cost as interest rates rise.

David Solomon, the CEO of Goldman Sachs, stated that he does not anticipate a rate decrease from the Federal Reserve this year.

Growing concerns about the timing of the decline in US and worldwide interest rates may temper Asian markets’ tentative optimism at the outset, which could be reinforced by the late-night release of Nvidia’s profits, a company that makes chips and artificial intelligence.

A day after smaller competitor Anglo American rejected its third acquisition offer and consented to a one-week delay for the deadline to make a binding offer, shares of multinational miner BHP Group plummeted more than 3%.

Spot silver dropped 0.7% to $30.56 an ounce, while palladium lost 1.5% to $985.00 and platinum declined 0.4% to $1,031.04.

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