In the world of precious metals, gold found itself facing uncertainty on Tuesday, with its value experiencing a slight dip as the US dollar maintained its strong position, lingering near recent peaks. However, the trading scene remained relatively calm, as investors eagerly awaited signals regarding the future path of the US Federal Reserve’s policies, following the widely anticipated interest rate pause this month.
The price of spot gold saw a marginal 0.1% decline, resting at $1,936.89 per ounce by 0356 GMT. Simultaneously, US gold futures experienced a 0.2% decrease, settling at $1,962.70 after a day off in the United States due to a public holiday on Monday.
Harshal Barot, a senior consultant at Metals Focus, voiced the prevailing sentiment, stating, “There is still much uncertainty surrounding the possibility of rate cuts in 2024 and the extent to which they will occur.” He went on to emphasize that the prospect of sustained higher US interest rates could act as a limiting factor on potential gold price surges.
Barot further explained that if the US economy successfully navigates towards a soft landing, there may be room for further declines in gold prices. This is due to the potential scaling back of aggressive rate cut expectations in the latter part of the upcoming year.
Recent economic data emanating from the United States has bolstered the belief in a soft landing scenario, as concerns regarding inflation and recession have somewhat alleviated. These developments have solidified the expectations that the Federal Reserve may not need to implement additional interest rate hikes.
Investor attention is now riveted on Federal Reserve officials who are slated to make public statements throughout the week leading up to the policy meeting scheduled for September 19 to 20.
According to the CME FedWatch tool, traders are currently assessing a 93% likelihood of the Federal Reserve maintaining the status quo by keeping rates unchanged during this month’s meeting. Moreover, there is approximately a 60% chance that interest rates will remain at their current levels for the remainder of the year.
It is a well-established fact that gold, as an asset that generates no interest, typically loses its allure when interest rates are on the rise.
Meanwhile, the US dollar index stubbornly clung just below the level of 104.447, a milestone achieved on August 25, representing its highest point since early June. This has effectively made greenback-priced metals more costly for international buyers.
In the broader spectrum of precious metals, spot silver encountered a 0.5% drop, now priced at $23.86 per ounce, while platinum experienced a 0.7% decline, settling at $947.55. Palladium, on the other hand, remained relatively stable, holding steady at $1,221.66.