Gold Prices Slide Amid Fed Rate Cut Bets, Softer Risks

Gold prices dip in Asian trade from record highs amid cautious anticipation of Federal Reserve (Fed) Chair Jerome Powell’s testimony, while heightened risk aversion suggests continued safe-haven demand.

On Wednesday Asian afternoon session, gold futures expiring in April declined by 0.40% to $2,133.25 per ounce, while spot gold fell by 0.13% to $2,125.19 an ounce.

The yellow metal surged on Tuesday to unprecedented levels, driven by a combination of safe-haven demand and ongoing expectations of future declines in US interest rates in 2024.

Moreover, spot gold reached an all-time high at $2,142.15 an ounce, with gold futures hitting a peak of $2,150.50 per ounce.

Meanwhile, traders are hesitant, waiting for additional signals regarding the Fed’s rate-cut trajectory before initiating new directional trades.

Analysts noted that many investors, feeling excluded from recent market gains and anticipating a stock market correction, are shifting towards gold.

Hence, the spotlight is on Powell’s congressional testimony, crucial in shaping short-term US dollar dynamics and offering a new direction for the non-yielding gold.

Reports show that markets anticipate a 70% probability of the Fed initiating rate cuts by June, keeping US Dollar strength in check and constraining downside risks for the commodity.

Additionally, enduring geopolitical tensions and China’s economic challenges dampened investor interest in riskier assets, prompting a shift towards the perceived safe-haven, precious metal.

Powell Statement Awaits, Gold Outlook Unsettles

Markets eagerly await a two-day testimony from Fed Chair Jerome Powell, starting Wednesday, seeking insights on the US interest rates.

Powell is anticipated to maintain a hawkish stance amid persistent inflation. Recent warnings from Fed officials indicate a reluctance to cut rates soon.

The potential for higher US rates has constrained gold’s upside, and the Fed Chair’s testimony may impact the current rally, especially if his tone is more hawkish than market expectations.

According to data, ahead of Powell’s testimony, traders largely maintain expectations of a 25-basis points rate cut by the Fed in June.

This week, attention also turns to the February nonfarm payrolls data.