City, Date – Gold experienced a significant dip on Wednesday, marking its lowest point in a month, as a result of hawkish comments from a US Federal Reserve policymaker. The cautious stance on an imminent rate cut elevated both the dollar and Treasury yields.
Spot gold witnessed a 1.1% decline, settling at $2,004.78/oz. by noon ET—its lowest level in 2024, after initiating the new year around $2,065/oz. Simultaneously, US gold futures mirrored this downturn, recording a 1.1% drop to approximately $2,007.50/oz.
Conversely, the US dollar index achieved a one-month high, propelled by comments from Fed Governor Christopher Waller, who urged the central bank not to hastily reduce rates until lower inflation could be sustained. Yields on the benchmark 10-year Treasury notes also experienced an upward trajectory.
Bob Haberkorn, Senior Market Strategist at RJO Futures, noted, “The markets are having doubts about interest rate cuts if the Fed can cut sooner than later, which is pressuring gold prices. With the dollar being strong and cuts taking time, it is hard for gold to hold a rally.” He added that geopolitical risks could provide a foundation for prices, keeping them around the $2,000 mark.
Traders have adjusted their expectations, with a 61% likelihood of a rate cut in March, down from the previous estimate of 73% before Waller’s comments, according to the CME FedWatch tool.
Although a rate cut in March appears less probable following Waller’s remarks, the overall expectation persists that the US central bank will embark on interest rate reductions in 2024. This anticipation is seen as a positive factor for the long-term outlook of gold.
