Dec 19, 2023: Gold values slipped marginally on Tuesday following reassurances from multiple Federal Reserve officials regarding the immediate likelihood of interest rate cuts, which contributed to stemming recent dollar declines.
The precious metal managed to stay above the coveted $2,000 per ounce mark but showed a slight decline toward the lower-$2,000 range, responding to the less dovish signals emanating from U.S. monetary policy.
Spot gold experienced a 0.1% drop, reaching $2,024.67 per ounce, while gold futures expiring in February recorded a 0.1% fall to $2,038.20 per ounce by 00:35 ET (05:35 GMT).
Federal Reserve Signals Dampen Rate Cut Expectations Several Fed officials expressed on Monday that the market’s optimism for immediate rate cuts was somewhat premature, considering persistent inflationary pressures that might keep monetary conditions tightened for a longer duration.
Chicago Fed President Austan Goolsbee expressed confusion over the market’s reaction to the Fed’s recent meeting. Additionally, Cleveland Fed President Loretta Mester clarified that the Fed’s focus was not on rate cuts but rather on determining the duration of policy tightening necessary to restore inflation to its 2% target.
These statements contrasted somewhat with the Fed’s relatively dovish stance during its last policy meeting of the year, where it indicated it had ceased raising interest rates and was contemplating cuts in 2024.
Market expectations had led to predictions of rate cuts as early as March 2024, sparking investments in rate-sensitive assets such as gold. The precious metal had surged above $2,000 an ounce post the Fed meeting and managed to sustain that level.
Anticipated China Stimulus Boosts Copper In the realm of industrial metals, copper prices surged on Tuesday, propelled by hopes of increased monetary stimulus in China following a substantial liquidity injection by the People’s Bank the prior week.
Copper futures expiring in March saw a 0.3% rise to $3.8595 per pound.
The red metal had experienced significant gains recently, tracking the dollar’s weakness and responding to the People’s Bank of China’s infusion of over $100 billion worth of yuan liquidity into the economy to fortify growth.
The PBOC is anticipated to maintain its benchmark loan prime rate at historic lows later this week.