Gold slides further after Fed’s hawkish comments

Bengaluru — Gold prices extended losses on Wednesday as the dollar strengthened after hawkish comments from a Federal Reserve official dampened the expectation for a March interest rate cut, while traders awaited comments from more Fed speakers this week.

Spot gold was down 0.2% at $2,023.49/oz, at 4.15am GMT, after stooping 1.3% in the previous session — its biggest single-day decline since December 4 2023. US gold futures also fell 0.2% to $2,026.90.

The flow of funds to the dollar has been a key driver affecting the gold price, said Michael Langford, chief investment officer at Scorpion Minerals, forecasting bullion to trade around $2,000/oz in the near term.

The dollar index rose 0.1%, making bullion more expensive for other currency holders. It shot up to a more than one-month high on Tuesday after Fed governor Christopher Waller said that the US central bank should not rush to lower interest rates until lower inflation can clearly be sustained.

Waller’s comments triggered a broad sell-off, pulling all three major US stock indices lower, while the benchmark US treasury yields logged their biggest daily move upwards in more than three months on Tuesday.

With geopolitical tension escalating, safe-haven flows could provide a floor for the gold price. However, “the short-term fate of the gold price is likely in the hands of the bond market,” Tim Waterer, chief market analyst at KCM Trade, wrote in a note.

Traders are pricing in an about 65% chance of a rate cut by the US central bank in March, down from about 75% probability seen on Tuesday morning, according to the CME FedWatch tool.

Spot silver fell 0.4% to $22.81/oz. Platinum declined 0.3% to $892.37 and palladium slipped 0.2% to $934.44. As the sister metals approach price parity, the rate at which platinum is displacing palladium in the manufacture of autocatalysts is slowing, a trend that is likely to persist in 2024.

Reuters