Gold flat after price slump as US Fed comment pushes back rate-cut hopes

GOLD was flat on Wednesday (Jan 17) after a sharp drop in prices in the previous session, as a US Federal Reserve official’s hawkish comments dampened expectations for a March interest rate cut, while traders awaited comments from more Fed speakers this week.

Spot gold was unchanged at US$2,027.62 per ounce, as at 0236 GMT, after stooping 1.3 per cent lower in the previous session- its biggest single day decline since Dec 4.

US gold futures were little changed at US$2,030.90.

Fed governor Christopher Waller said on Tuesday that while inflation was approaching the central bank’s 2 per cent goal, the Fed should not rush to lower interest rates until lower inflation can clearly be sustained.

A report over the weekend showed Atlanta Fed president Raphael Bostic said inflation could “see-saw” if policymakers cut rates too soon, while his European counterparts also pushed back against market expectations of rapid rate cuts this year.

Waller’s comments triggered a broad sell-off, pulling all three major US stock indexes lower, and sent the US dollar to a more than one-month high as benchmark US Treasury yields logged their biggest daily move upwards in more than three months on Tuesday.

A stronger US dollar makes bullion more expensive for other currency holders, while higher rates decrease gold’s appeal.

Traders are pricing in an about 65 per cent chance of a rate cut by the US central bank in March, down from about 75 per cent probability seen on Tuesday morning, according to the CME FedWatch tool.

However, money markets were still betting on six rate cuts of 25 basis points each this year, according to LSEG’s interest rate probability app, IRPR.

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Other precious metals fell by 0.1 per cent each, with Spot silver at US$22.89 per ounce, platinum at US$894.29, and palladium at US$937.52. REUTERS