Gold Prices Retreat as Fed Meeting Minutes Loom

On Wednesday, gold prices declined as investors awaited cues on the Federal Reserve’s (Fed) plans for interest rates.

In the Asian afternoon session, the futures for the yellow metal ending in June dipped by -0.32% to $2,418.25 per troy ounce, while spot gold plummeted by -0.25% to $2,414.91 an ounce.

Chief market analyst Tim Waterer said the yellow metal has stayed above $2,400 ahead of a possibly more lenient interest rate scenario later this year.

Waterer, however, noted that for gold to reach new record highs, a decline in the dollar or bond yields or a rise in demand for safe-haven assets might be necessary.

According to Analyst Kevin Wong, one reason supporting gold’s value is the weakness of fiat currencies in the US and other developed countries, driven by increasing budget deficits.

Wong also said the growing focus on fiscal stimulus in these countries could undermine confidence in their respective currencies.

Meanwhile, traders have estimated a 64.00% chance of a September interest rate reduction from the Fed.

Recent readings signaled that US inflation continued to ease. However, Fed officials stated on Tuesday that the central bank should hold off rate cuts for several more months to ensure inflation is returning to their annual 2.00% target.

Lower interest rates and geopolitical uncertainty tend to strengthen the investment appeal of gold.

Gold Under Pressure Amid Fed Chair Powell’s Rate Cut Hints

Focus now shifts to the minutes of the Fed’s late-April meeting, which will be released later Wednesday, as traders seek further interest rate indications from the central bank.

Fed decided to maintain interest rates within the 5.25%-5.50% range, although Chair Jerome Powell hinted at a potential rate reduction in 2024.

Traders will observe to confirm whether all Fed officials shared this view, especially given the persistence of sticky inflation.

Higher interest rates weigh down gold as they raise the cost of investing in the precious metal.

Gold hit record highs earlier this week due to increased demand for safe-haven assets, but the lack of escalation in the Middle East has made the yellow metal vulnerable to interest rate impact.