Gold Retreats as Dollar Gains, Investors Eye Fed’s Next Move
Global gold prices experienced a pullback in Wednesday’s trading, pausing after a recent rally that had pushed the precious metal to a three-week high. The shift in momentum underscores the market’s delicate balance between a strengthening US dollar and persistent investor optimism regarding potential interest rate cuts.
A Shift in Momentum
After climbing to a peak of $4,144 on Tuesday, the price of gold trended downwards, settling around $4,118 per ounce. This retreat coincided with a slight 0.1% appreciation of the US dollar against a basket of rival currencies, which dampens gold’s appeal for holders of other currencies. Market analysts attribute the dip to a natural wave of profit-taking by investors following the metal’s significant gains in the previous session.
The Federal Reserve’s Central Role
The primary driver behind recent market sentiment remains the anticipated monetary policy of the US Federal Reserve. According to the CME Group’s FedWatch tool, traders now assign a 68% probability to a 25-basis-point interest rate cut at the Fed’s upcoming meeting, an increase from 64% previously. Since gold offers no direct yield, it becomes more attractive in a low-interest-rate environment.
Tim Waterer, Chief Market Analyst at KCM Trade, noted, “The recent decline in the dollar’s value has benefited gold and silver, with both metals showing a positive trend this week.” He added, “Gold appears to have resumed its natural trading pattern; the precious metal has stabilized again above the $4,100 level and could target higher goals if positive US macroeconomic data continues, especially if more expansionary policies are implemented by the Fed.”
Broader Economic and Political Context
The market’s focus is also fixed on forthcoming US economic data for clearer directional cues. This follows a recent political development in the US Senate, which approved an agreement to restore federal government funding, ending a period of administrative suspension that had delayed key economic data releases and other federal operations.
Other Precious Metals and Market Indicators
The movement was not isolated to gold. Other precious metals also saw adjustments:
- Spot silver fell 0.4% to $51.05 per ounce.
- Platinum was down 0.4% at $1,578.95.
- Palladium declined by nearly 1% to $1,431.47 per ounce.
In a sign of sustained investor interest, the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported its holdings increased by 0.41% to 1,046.36 tonnes on Tuesday.