Gold Steadies Above $2,300 Amid Fed Rate Cut Uncertainty

Gold prices traded on stable grounds on Thursday amid soft safe-haven demand and continued uncertainty over the direction of the Federal Reserve’s interest rates.

Spot gold rose 0.20% to $2,313.57 per ounce, although it was still over $100 short of its highest level in April.  June contract gold futures dropped 0.09% but stayed above $2,300 at $2,320.30 per ounce.

Safe haven demand has slightly strengthened this week on further escalation of tensions between Israel and Hamas, with negotiations for a ceasefire barely moving forward.

However, purchases in the market were limited by renewed concerns about high interest rates in the US and as the dollar recuperated losses.

Fed Officials’ Hawkish Remarks Keep Gold in Check

Gold prices were hardly boosted by the dollar’s recent slide, which recovered after Fed officials downplayed bets on interest rate cuts this year.

Minneapolis Fed President Neel Kashkari supported the prospect, stating that interest rates might remain at current levels through 2024, leaving room for a rate hike if US inflation stood close to 3%. Lower rates are usually beneficial for the yellow metal.

Boston Fed President Susan Collins also shared the sentiment, saying interest rates may need to stay elevated longer than previously expected to ease demand and price pressures.

According to Collins, the recent unexpected increases in economic activity and inflation strengthened the case for keeping the monetary policy unchanged. The central bank would need to see slower growth in the world’s largest economy to confirm that inflation is moving towards the Fed’s 2% target.

However, recent data has led Collins to expect interest rate reductions to take longer than initially anticipated.

The possibility of a rate cut in September has been bolstered following a slower-than-expected US job growth in April. Still, sticky inflation remains a critical contrasting factor for the Fed.

Traders now await the release of unemployment claims later Thursday, followed by the University of Michigan’s (UoM) consumer sentiment data for May on Friday.

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