Investors weigh a possible 25-basis-point rate cut in November, with expectations shaped by economic data and Federal Reserve insights
Gold prices fell for the sixth consecutive session on Wednesday, pressured by a rising US dollar and tempered expectations for a significant rate cut at the Federal Reserve’s upcoming November meeting. As the market awaited the release of the Federal Reserve’s September policy meeting minutes, investors kept a close eye on potential clues regarding the Fed’s future interest rate path.
By 11:07 a.m. ET (1507 GMT), spot gold dropped 0.2% to $2,615.83 per ounce, continuing its downward trend. Meanwhile, US gold futures for December delivery held steady at $2,634.40.
The dollar index surged to a near two-month high, increasing the cost of bullion for investors holding other currencies. A stronger dollar typically weighs on gold prices, as it makes the metal less attractive for those dealing in foreign currencies.
“The dollar index continues to firm up, and economic data is more supportive for a 25-basis-point cut,” noted Phillip Streible, Chief Market Strategist at Blue Line Futures. He further explained that if the Fed minutes signal a dovish stance or hint at more aggressive rate cuts, it could potentially push gold prices up to the $2,650 mark.
Markets Eyeing Federal Reserve Minutes and Key Economic Data
The focus now shifts to the release of the Federal Reserve’s minutes from its September 18 policy meeting, expected at 1800 GMT, along with the upcoming US Consumer Price Index (CPI) and Producer Price Index (PPI) data due on Thursday and Friday. These data points are anticipated to provide more clarity on inflationary pressures and economic health, influencing the Fed’s decision on interest rates.
While the prospect of lower interest rates typically supports non-yielding assets like gold, the odds of a 50-basis-point cut have been significantly discounted. According to the CME FedWatch tool, markets are currently pricing in an 84% chance of a 25-basis-point rate cut in November, bolstered by last week’s strong jobs report.
“Despite the modest pull-back, expectations of lower interest rates and ongoing geopolitical tensions suggest the backdrop for gold is likely to remain supportive over the long term,” remarked Carlo Alberto De Casa, Market Analyst at Kinesis Money.
Other Metals Follow Suit Amid Dollar Strength
In other metals, silver inched down 0.1% to $30.67 per ounce, while platinum rose by 0.3% to $952.95. Palladium, meanwhile, climbed 1.1% to $1,032.00.
Though gold has seen a decline in recent sessions, a rebound in its prices to record highs has dimmed hopes for a prosperous festival season in India, one of the world’s largest bullion markets. With elevated prices dampening consumer demand, the country’s bullion industry had anticipated stronger sales ahead of the Diwali celebrations.
As the market braces for further insights from the Federal Reserve, the future of gold prices will likely hinge on the central bank’s tone and its approach to managing inflation and economic growth.
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