Gold prices slumped on Wednesday due to a stronger dollar, rising bond yields, and hawkish remarks from a Federal Reserve official, which dampened market sentiment ahead of the U.S. inflation data release.
By 10:00 a.m. ET (1400 GMT), spot gold had decreased by 0.7 per cent to $2,345.62 per ounce, while U.S. gold futures fell by 0.4 per cent to $2,346.10.
“Market participants are closely watching the US central bank for hints regarding potential interest rate cuts, which has been keeping them on edge. Despite expectations for rate cuts earlier in the year, hawkish comments from Fed officials have tempered those beliefs, leading to a reduction in anticipated rate cuts from over four to approximately two for the year 2024,” brokerage firm MOFSL said in a report.
The dollar strengthened by 0.2 per cent compared to other currencies, resulting in higher prices for gold for holders of other currencies. Concurrently, the benchmark U.S. 10-year Treasury yields reached a nearly one-month high.
What’s weighing on gold prices?
Minneapolis Fed Bank President Neel Kashkari suggested on Tuesday that the U.S. central bank should hold off on reducing interest rates until there’s notable advancement in inflation.
Traders are awaiting the release of the U.S. core personal consumption expenditures (PCE) price index report on Friday, which is the Fed’s favored gauge of inflation. They hope this report will provide more insight into when and to what extent rate cuts might occur.
In a surprising turn, U.S. consumer confidence rose in May despite declining for three straight months. This uptick was driven by optimism surrounding the labor market, as revealed by a recent survey.
Also read: Gold price jumps ahead of US GDP data release, silver rate rebounds after retracing from record high
“Geopolitical tensions have added to the risk premium for gold as concerns about debt pose long-term challenges to overall growth. The economic indicators from the US continue to show strength in the economy. Additionally, along with central bank buying, festive and wedding-related domestic demand could boost sentiment. It says that although ETF buying is struggling, investment and central bank buying are maintaining strong demand momentum,” said Navneet Damani, Group Senior VP – Commodity Research at Motilal Oswal Financial Services.
Silver experienced a 0.4 per cent decrease, settling at $31.98 per ounce following its 11-year high last week. Platinum saw a nearly 2 per cent decline to $1,042.70 per ounce, while palladium dropped 1.7 per cent to $956.50.
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Published: 29 May 2024, 09:50 PM IST
