Gold price falls on diminished hope of US Fed rate cut

Gold prices slipped on Monday as hopes for early interest rate cuts this year dampened, while focus shifted to the US Federal Reserve policy meeting and US nonfarm payrolls data due this week for further clarity on monetary policy.

Spot gold fell 0.5% to $2,327.09/oz by 3.34am GMT. US gold futures were down 0.4% at $2,338.30/oz.

“Short term, gold is facing some challenges given the likely delayed timeline for rate cuts. However if gold can remain in the $2200-$2350 range, the precious metal will be well positioned to capitalise on any potential downturn in US macro data in coming quarters,” Tim Waterer, chief market analyst at KCM Trade said.

The Federal Reserve’s policy meeting from April 30-May 1 and the non-farm payrolls data due on Friday are key for markets this week. The Fed is seen holding its benchmark interest rate steady at 5.25%-to-5.5% at this meeting.

“If we happen to hear a hawkish tilt from [US Fed chair] Jerome Powell this week, combined with another solid jobs print, gold could be facing a Test of some key support levels on the downside,” Waterer said.

Investors are now pricing in a single rate cut this year and see it coming in November, according to the CME's FedWatch tool after a batch of sticky US inflation data and hawkish rhetoric from Fed officials including Powell.

Higher rates reduce the appeal of holding nonyielding gold.

“A seasonal pullback in regional demand is probable into mid-2024, but a structurally stronger consumption trend via the retail and PBoC (People’s Bank of China) channel is supportive of a higher gold price floor, boosting the base case for $3,000/oz gold over the next 12-15 months,” Citi research wrote in a note, adding that CNY devaluation fears may enhance local buying.

Spot silver rose 0.3% to $27.24/oz, spot platinum was up 0.5% to $919.95/oz and palladium gained 0.1% to $954.94/oz.

Reuters