Gold prices declined below the $2,360 level on Wednesday as traders reduced their expectations of an interest rate cut following remarks from Federal Reserve officials. Meanwhile, markets now await the release of U.S. inflation data due on Friday for more insights into the economy’s trajectory and the possibility of an interest rate cut.
Spot gold saw a 0.07 percent decline to $2,359.55 per ounce, as of 5:32 GMT. Meanwhile, U.S. gold futures saw a 0.17 percent increase to $2,360.50.
Rate cut bets diminish
As traders await the highly anticipated April personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, which is due on Friday, expectations of an interest rate cut soon are diminishing, impacting gold prices. In a recent interview, Minneapolis Federal Reserve Bank president Neel Kashkari said that the central bank needs to wait for significant progress on inflation before cutting interest rates. The market now awaits more remarks from Fed officials and the revised reading of the first quarter GDP for more insights into policy trajectory.
In light of hawkish remarks and uncertainty in inflation’s trajectory, traders have signaled growing skepticism about the central bank cutting rates more than once this year. According to the CME FedWatch Tool, traders are currently pricing in about a 60 percent chance of a rate cut by November. Gold is traditionally an inflation hedge. However, higher rates increase the opportunity cost of holding non-yielding assets like gold, thus impacting their prices.
Read: Gold prices dip as focus shifts to U.S. inflation data
Other precious metals
In addition to the decline in gold prices, other precious metals saw mixed movements. Spot silver rose 0.08 percent to $32.13 per ounce, platinum rose 0.02 percent to $1,063.97 while palladium declined 0.32 percent to $982.23.
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