Gold price falls as hope wanes for US Fed rate cuts soon

Bengaluru — Gold prices inched lower on Wednesday, as hawkish comments by US Federal Reserve officials and strong US data doused hopes for early interest-rate cuts, while investors awaited a slew of economic reports this week for more clarity on rate trajectory.

Spot gold fell 0.2% to $2,024.46/oz by 3.27am GMT. US gold futures were unchanged at $2,025.50/oz.

“Recent economic data out of the US has called for some recalibration in dovish market rate expectations, with some pushback on the timeline for a Fed rate cut weighing on gold’s appeal,” said IG market strategist Yeap Jun Rong.

Lower interest rates reduce the opportunity cost of holding nonyielding bullion.

“That said, rising geopolitical tensions may limit its downside… with the $2,000 level on watch as near-term support to hold,” Rong said.

The dollar index fell 0.1%, but hovered near a six-week high hit on Tuesday. Yields on benchmark US 10-year treasury notes edged lower, but held above 4%.

In wider financial markets, Asian shares rose on optimism that Chinese authorities would offer support for its stock markets, which have plummeted to multiyear lows.

Market focus is on the US flash PMI report due at 2.45pm GMT later on Wednesday, fourth-quarter advance GDP estimates on Thursday and personal consumption expenditures data on Friday.

Traders have priced in five quarter-point Fed rate cuts for 2024, down from six cuts two weeks ago. Initially seen in March, the first cut is now expected in May with an 89% probability, according to LSEG’s interest-rate probability app IRPR.

A Fed official last week said the baseline for cuts to start was in the third quarter.

Spot silver fell 0.2% to $22.38/oz, platinum slipped 0.1% to $899.21, and palladium fell 0.5% to $943.23.