Gold didn’t fall in Asian trading on Wednesday, but has been losing heavily in the past two sessions as alarmist comments from Federal Reserve officials prompted traders to rethink expectations of another interest rate hike. This puts Fed Chairman Jerome Powell’s upcoming speech right in the middle, as his comments at a conference call last week were perceived by the markets as less than a little hawkish.
Gold saw some gains last week after the Fed meeting and a softer-than-expected reading of non-farm payrolls raised hopes that the central bank’s rate hike cycle would end. But many Fed officials downplayed expectations of stagnation, citing strength in the economy and the need for more growth amid active inflation. This weakened the outlook for gold, as rising rates reduced the opportunity to invest in the yellow metal.
Spot gold was down 0.1% at $1,967.78 an ounce, while December-end gold futures were flat at $1,973.85 an ounce as of 23:33 ET (04:33 GMT).
Powell’s focused speech as Fed officials downplay pauses Powell is scheduled to speak twice this week, once Today and Friday. Other presentations will focus on the US. directly on the economy and monetary policy, especially in the wake of weaker-than-expected October non-farm payroll readings. But before Powell, several Fed officials, including Gov. Michelle Bowman, Minneapolis Fed President Neil Kashkari, and Chicago Fed President Auston Goolsby, among others, noted that prices remain high and could rise again in the coming months.
Even if the Fed pauses a bit, rate cuts are expected to begin in mid-2024, limiting any substantial near-term gains for gold. The central bank has indicated that the U.S. currency prices will increase over the long term—probably remaining at 5% until the end of 2024. This scenario does not bode well for the yellow metal in the short term.
Amid easing market anxiety over the Israeli-Hamas conflict, demand for safe gold was declining. Gold struggled to recover on Wednesday as investors demanded more interest rate clarity from the Federal Reserve chief. U.S. gold futures were flat at $1,974.10 The dollar expanded its advantage over competitors, making gold more expensive than gold for holders of other currencies. [USD/]
“The geopolitical risk premium digests and as central banks recoil from rate hikes, it ultimately reduces yields. So, there’s not much to drive catalysts for gold this week,” said Ilya Spivak, head of global macro at Tastylive. [we/] Several Fed officials on Tuesday maintained a moderate tone in the central bank’s next decision but noted that they would focus on a wide range of economic issues and the impact of rising long-term bond yields
Investors are now awaiting comments from Fed Chairman Jerome Powell, who is scheduled to speak on Today and Friday. “Obviously we will see a reiteration of what Powell said at the Economic Club of New York, and the FOMC (Federal Open Market Committee) last week about three weeks ago, that the Fed is going to hold rates at these levels, but they may have done the walking,” Spivak said