Gold price dips below $2,000 amid shifting Fed expectations

14 Feb 2024 , 10:17 AM

Wednesday saw gold linger close to a two-month low, trading below the crucial $2,000 per ounce mark, as expectations for more than three quarter-point rate cuts from the Federal Reserve were dampened by a stronger-than-expected U.S. inflation report.

Spot gold was down 0.1% at $1,991.09 per ounce (Oz), having fallen as low as it had on Tuesday, December 13. On Tuesday, the price of gold dropped 1.4%, marking the largest daily loss since December 4.

The price of US gold futures dropped 0.2% to $2,003.60/oz.

Due to increases in the cost of housing and healthcare, U.S. consumer prices rose more than anticipated in January.

Following the release of the U.S. CPI statistics, traders conjectured that Fed policymakers would likely hold off on reducing interest rates until June. Keeping bullion has a higher potential cost when interest rates are higher.

While 10-year Treasury yields were close to a two-and-a-half-month high, the U.S. dollar index was hovering around a three-month top.

All three of the main U.S. stock indexes had losses of more than 1% on Tuesday, contributing to a decline in global stock market indices.

This year, the money markets have factored in roughly three quarter-point rate cuts, compared to four cuts prior to the release of the inflation data. This is consistent with the Federal Reserve’s rate projections, or the so-called ‘dot plot’ that was unveiled back in December.

With a 75% probability, the first Fed rate cut is now anticipated to occur in June.

Due to China’s markets being closed for the Lunar New Year holidays, there should be little trading activity.

U.S. retail sales data, which is coming on Thursday, and producer pricing index (PPI) data, which is due on Friday, will now be of interest to investors. This week, at least five Fed officials are scheduled to speak.

Spot silver declined 0.2% to $22.03, spot palladium slid 0.5% to $859.49, and spot platinum dipped 0.1% to $870.81/Oz.

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