Gold set for first monthly decline in four

Bengaluru — Gold prices on Wednesday were headed for their first monthly dip in four as investors tempered their bets of swift and deep rate cuts in the US in the light of a resilient economy, and also awaited remarks from the Federal Reserve due later in the day.

Spot gold edged 0.1% lower to $2,033.28/oz by 3.30am GMT, after touching a two-week high of $2048.12 in the previous session. Prices have dropped 1.4% so far in January. US gold futures were flat at $2,032.70.

“Gold’s seasonal rally seemed to have arrived early, so it’s not too much of a surprise to see it struggle this January … traders are slowly coming around to a less-dovish Fed than they had hoped for in December,” said Matt Simpson, a senior analyst at City Index.

Traders are pricing in about 130 basis points (bps) of Fed rate cuts for 2024, down from bets of more than 160bps at the end of 2023, according to LSEG’s interest rate probability app IRPR. The chances of a March rate cut have dropped to 44%, from about 90% a month ago.

The dollar index was on track to mark its best month since September, with a more than 2% gain so far in January. Yields on benchmark US treasury notes were at a two-week low of 4.0261%, but still higher than the year-end close of 3.8600%.

“With renewed hopes of a truce in Gaza, today’s FOMC [Federal open market committee] meeting runs the risk of disappointing doves and weighing on gold,” said Simpson.

Market focus is on the Fed’s statement at the end of its two-day policy meeting at 7pm GMT, where it is expected to leave rates unchanged, which is followed by a news conference by chair Jerome Powell at 7.30pm GMT.

Spot silver fell 0.4% to $23.07/oz, platinum slipped 0.3% to $917.90, and palladium dropped 0.3% to $973.26. All three were poised for a monthly decline.