Feb 15 2024: In Asian trading on Thursday, gold prices remained relatively unchanged, staying below significant support levels as the allure of the yellow metal continued to be dampened by expectations of prolonged higher U.S. interest rates.
Bullion prices found slight respite from marginal declines in the dollar, which stabilized during overnight trading after surging to its highest level in three months earlier this week. The dollar is now anticipated to experience further short-term strengthening, as traders increasingly adjust their expectations regarding potential early rate cuts by the Federal Reserve.
A number of Federal Reserve officials have also cautioned that the central bank will maintain higher interest rates if inflation persists – a scenario that doesn’t bode well for gold. Elevated rates increase the opportunity cost of holding onto bullion investments.
Spot gold remained steady at $1,992.27 per ounce, while gold futures expiring in April experienced a slight decline to $2,003.70 per ounce. Both assets remained near two-month lows, edging closer to testing support levels around $1,970 and $1,980 per ounce.
Market expectations for rate cuts in May and June have been gradually reduced, according to the CME Fedwatch tool, amid mounting uncertainty regarding the timing of potential interest rate adjustments by the Federal Reserve.
Although the central bank has indicated its intention to eventually lower interest rates this year, it has provided limited signals regarding the timing and magnitude of such moves. Thus far, the Fed has adopted a primarily data-driven approach to its interest rate decisions, and recent economic data suggests that early rate cuts are unlikely.
Investor attention now turns to upcoming U.S. retail sales and jobless claims data, scheduled for later in the day, for further insights into the performance of the world’s largest economy. Additionally, the release of producer price index inflation data for January on Friday is expected to offer additional indications regarding inflation trends.
Several more Federal Reserve officials, including Christopher Waller and Mary Daly, are slated to speak in the coming days, providing further clarity on monetary policy.
The persistent uptrend in U.S. interest rates has constrained significant gains in gold over the past couple of years, despite deteriorating economic conditions in other parts of the world prompting some demand for safe-haven assets. This pattern is expected to persist in the near future.
