Gold prices experienced a slight decline on Tuesday as several Federal Reserve officials tempered expectations of an imminent dovish pivot by the central bank, contributing to a rebound in the dollar.
Despite the dip, the precious metal maintained its position above the coveted $2,000-an-ounce level but approached the low-$2,000s following less dovish signals on U.S. monetary policy.
Spot gold recorded a 0.1% decrease to $2,024.67 per ounce, while gold futures expiring in February slipped 0.1% to $2,038.20 per ounce by 00:35 ET (05:35 GMT).
Federal Reserve Officials Temper Rate Cut Expectations
Federal Reserve officials sought to downplay market expectations of immediate interest rate cuts on Monday. Chicago Fed President Austan Goolsbee expressed confusion over market reactions to the Fed’s last week’s meeting. Cleveland Fed President Loretta Mester clarified that the Fed wasn’t contemplating rate cuts but rather assessing how long policy needed to stay tight to restore inflation to its 2% target.
These comments contrasted with the dovish outlook presented by the Fed during its final policy meeting for the year, where the central bank signaled the end of interest rate hikes and potential cuts in 2024.
Market reactions to the Fed’s meeting led to expectations of rate cuts by as early as March 2024, triggering flows into rate-sensitive assets like gold. Despite the recent comments from Fed officials, markets retained their bets on early rate cuts, with Fed Fund futures prices indicating nearly a 63% chance for a 25 basis point rate cut in March 2024.
Gold, often seen as a hedge against inflation and benefitting from a lower interest rate environment, has sustained its level above $2,000 an ounce, reflecting ongoing market uncertainties.
