Gold prices fell below $2,400 as expectations for interest rate cuts diminished

Gold prices dipped in Asian trading on Wednesday as comments from key Federal Reserve officials tilted towards a more hawkish stance, lifting the dollar and Treasury yields, thereby exerting downward pressure on the precious metal.

Despite the slight decline, gold prices stayed within reach of recent highs, supported by ongoing concerns surrounding the conflict between Iran and Israel, which continued to drive demand for safe haven assets like gold.

Gold prices surged to all-time highs last week following Iran’s strike on Israel, heightening tensions in the region. Investors are now closely monitoring for potential retaliation from Israel, amid reports suggesting that a response may be imminent.

Spot gold steadied at $2,382.65 an ounce, while gold futures for June delivery dipped 0.4% to $3,398.70 an ounce by 00:21 ET (04:21 GMT). The spot gold price had reached record highs above $2,400 an ounce on Friday.

Powell’s stance on prolonged higher rates added pressure on gold prices

Gold prices retreated from record highs this week as robust U.S. inflation and retail sales data led traders to reassess expectations for a Fed interest rate cut in June.

Fed Chair Jerome Powell reinforced this sentiment on Tuesday, stating that the central bank lacked confidence in cutting interest rates amid persistent inflation pressures.

Powell’s remarks bolstered the dollar and Treasury yields, pushing the greenback to its highest level in over five months and weighing on broader commodity markets.

Traders were now pricing in a nearly 80% chance that the Fed will maintain rates in June, a significant shift from previous expectations of a 25 basis point cut, as indicated by the CME Fedwatch tool.

The likelihood of higher-for-longer interest rates is unfavorable for gold, considering the metal’s lack of direct yield. This expectation could constrain further upward movement in gold, particularly given its current position in overbought territory.

On Wednesday, other precious metals followed suit with declines. Platinum futures dropped by 0.6% to $965.10 per ounce, while silver futures fell by 0.5% to $28.223 per ounce.

Copper and aluminum prices cooled amid pressure from the strengthening dollar

Industrial metal prices remained steady on Wednesday following a recent strong rally, buoyed by new sanctions on Russian metal exports that signaled tighter markets. However, the continued strength of the dollar and the prospect of higher interest rates led to some pullback in prices, raising concerns about potential dampened demand.

Three-month copper futures on the London Metal Exchange remained steady at $9,465.50 a ton, while one-month copper futures saw a slight increase of 0.1% to $4.2995 a pound.

Aluminum futures stabilized around $2,559.0 a ton.

Metal prices surged to 15-month highs last week following new sanctions on Russian metal exports. Positive economic data from China also contributed to the bullish sentiment.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.87% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.