Gold slides below U.S.$2,000, market eyes Fed rate hike cues

Ingots of 99.99 percent pure gold are placed in a workroom at Krastsvetmet precious metals plant in the Siberian city of Krasnoyarsk, Russia, January 31, 2023. REUTERS/Alexander Manzyuk


On Monday, gold dipped below the crucial U.S.$2,000 mark as a robust dollar and increasing Treasury yields influenced its value, with investors seeking indications of a potential single rate hike by the U.S. Federal Reserve in May.

By 1:40 p.m. EDT (17:40 GMT), spot gold had decreased 0.4% to $1,995.42 per ounce, following a 0.6% surge earlier in the day. U.S. gold futures closed at $2,007, 0.4% down. Kitco Metals’ senior analyst, Jim Wyckoff, attributed the pressure on gold to a stronger U.S. dollar, rising bond yields, and profit-taking from recent gains.

The U.S. dollar appreciated 0.6%, making gold priced in dollars less appealing for international buyers, while benchmark Treasury yields reached their highest in over two weeks.

Despite the current decline, Wyckoff maintained that gold’s trend is positive and anticipates a new record high in the coming weeks.

On Friday, gold fell 2% after the dollar’s recovery, with Fed officials implying a possible rate increase of 25 basis points (bp) next month. Nevertheless, last week’s economic data revealed a slowing U.S. economy, fueling speculations that the next Fed rate hike may be the last.

According to the CME FedWatch tool, the market predicts an 86% likelihood of a 25-bp hike in May and a 2-in-3 chance of a pause in June.

Kinesis Money’s external analyst, Carlo Alberto De Casa, identified the $1,980-$2,000 range as a strong support area for gold.

Investors will be closely monitoring statements from Fed officials this week before the commencement of a blackout period on April 22, leading up to the Fed’s meeting on May 2-3.

Spot silver dropped 1.4% to $24.99 per ounce, while platinum increased 0.4% to $1,048.36, and palladium rose 3.4% to $1,554.85.

Source: Reuter