Jan 19, 2024: Gold prices stabilized on Friday after experiencing significant declines throughout the week, as increasing skepticism about early interest rate cuts by the Federal Reserve negatively impacted the precious metal.
The price of gold had sharply dropped to a one-month low on Wednesday but found some support around the $2,000 an ounce level, driven by safe-haven demand. The decline in gold was primarily attributed to traders shifting towards the dollar due to robust economic data and hawkish-leaning comments from Fed officials, leading to reduced expectations of a rate cut in March.
Despite the downward pressure, gold received some support from safe-haven demand as tensions escalated in the Middle East. Ongoing clashes in the Red Sea between U.S. and UK forces and the Iran-led Houthi group, along with increasing tensions between Iran and Pakistan after a series of strikes, contributed to geopolitical concerns.
As of 00:35 ET (05:35 GMT), spot gold was down 0.1% at $2,020.91 per ounce, while gold futures expiring in February remained flat at $2,022.75 per ounce. Both instruments were on track to register approximately a 1.4% decline for the week.
The pressure on gold was primarily driven by diminishing expectations of a Fed rate cut in March 2024, highlighting the ongoing challenges for the precious metal due to prolonged higher interest rates, which increase the opportunity cost of holding gold investments.