Gold prices drop as US rate-cut hopes fade
GOLD prices declined on Monday (Jan 22), as hopes of a March interest rate cut by the US Federal Reserve faded, while traders awaited key US economic data and major central bank policy meetings this week.
Spot gold was down 0.2 per cent at US$2,026.40 per ounce, as at 1237 GMT. US gold futures were steady at US$2,029.00.
“At the moment, we have this asymmetry between what central banks are saying and what the market was pricing,” said Carlo Alberto De Casa, market analyst at Kinesis Money.
“The market is now repricing, and is changing this view and realising that there was too much optimism about the central bank’s (rate cut) decisions.”
The US dollar index fell around 0.1 per cent, while yields on benchmark US 10-year Treasury notes slipped from a more than a month high.
Bullion fell about 1 per cent last week – its biggest weekly decline in six weeks – after Fed officials said they need more inflation data in hand before any rate cut judgment could be made, and that the baseline for cuts to start was in the third quarter.
Traders now price in about a 48 per cent chance that the Fed will cut interest rates in March, according to the CME Fed Watch Tool.
Investors will be watching out for the US flash purchasing managers’ index report on Wednesday, Q4 advance gross domestic product estimates due on Thursday, and personal consumption expenditures data on Friday for more cues on interest rates.
Higher interest rates increase the opportunity cost of holding bullion.
Spot silver fell 1.8 per cent to US$22.19 per ounce, platinum lost 0.3 per cent to US$896.20, and palladium slipped 2.9 per cent to US$919.25.
“We think platinum will again become moderately more expensive than palladium,” UBS said in a note.
The bank expects platinum to be undersupplied by 300,000 ounces in 2024, for a second consecutive year, mainly on the back of the platinum-to-palladium substitution in autocatalysts. REUTERS
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