In a significant market development, gold prices experienced a decline on Wednesday following the widely anticipated decision by the U.S. central bank to maintain its current interest rates. Federal Reserve Chair Jerome Powell affirmed that the prospect of rate cuts is not currently under consideration.
At 3:10 p.m. Eastern Time (1910 GMT), spot gold exhibited a 0.3% drop, reaching $1,976.39 per ounce. Simultaneously, U.S. gold futures saw a 0.3% decrease, settling at $1,987.50.
The Federal Reserve’s decision to keep interest rates unchanged, while acknowledging the U.S. economy’s unexpected robustness, also signaled an openness to future adjustments in borrowing costs in response to evolving financial conditions.
Suki Cooper, an analyst at Standard Chartered, commented on the situation, stating, “While the macro shadows persist after the Fed meeting (including ongoing dollar strength, rising expectations of sustained higher rates, and waning inflationary pressures), the geopolitical premium has outweighed these concerns.”
Fed Chair Jerome Powell explicitly stated that the U.S. central bank is not contemplating any rate reductions at this time.
This week has witnessed a slight retraction in gold prices after briefly surpassing the significant $2,000 threshold last Friday. Gold’s 7% increase during October was primarily attributed to robust safe-haven demand, driven by escalating geopolitical tensions in the Middle East.
Following the Federal Reserve’s announcement, the U.S. dollar maintained its gains, while benchmark 10-year U.S. Treasury yields descended to two-week lows. Traders have started to increase bets that the central bank has concluded its policy rate hikes and will commence rate cuts as early as June next year. Higher interest rates serve to elevate the opportunity cost of holding gold.
Bart Melek, Head of Commodity Strategies at TD Securities, expressed an optimistic outlook, stating, “A combination of eventually lower rates, a diminishing U.S. dollar, and significant official sector buying should contribute to gold’s longer-term prospects.”
Market observers are also closely monitoring the upcoming release of the October non-farm payrolls report, scheduled for Friday.
In addition to gold, other precious metals experienced price shifts. Silver saw a 0.6% decrease to $22.77 per ounce, platinum declined by 1.2% to $922.24, and palladium slipped by 0.5% to $1,109.03.
