Diminished Expectations of Fed Rate Cuts Keep Gold Below $2,000; Palladium Surges
Gold prices remained below the significant $2,000-per-ounce threshold on Wednesday, as stronger-than-expected U.S. inflation data led investors to scale back expectations for early Federal Reserve interest rate cuts. Meanwhile, palladium surged over 8%.
At 01:44 p.m. EST (1844 GMT), spot gold held steady at $1,991.92 per ounce, marking its lowest level since December 13.
The precious metal had experienced a decline of approximately 1.4% on Tuesday. U.S. gold futures settled slightly lower at $2,004.3, down 0.1%.
According to Bob Haberkorn, senior market strategist at RJO Futures, gold faced downward pressure following the release of CPI data, as the market had previously anticipated Fed rate cuts.
He noted that further confirmation of delayed rate cuts could contribute to gold’s continued decline.
Recent data revealed that U.S. consumer prices rose more than anticipated in January, with an annual increase of 3.1%, surpassing economists’ expectations of a 2.9% rise.
Consequently, traders revised their expectations, now forecasting three 25-basis-point rate cuts in 2024, down from four, in line with the Fed’s projections from December.
It is anticipated that the central bank may postpone rate cuts until June, as higher interest rates increase the opportunity cost of holding gold.
Investor attention now turns to U.S. retail sales and producer price index data scheduled for release on Thursday and Friday, respectively, along with speeches from at least five Fed officials this week.
Spot palladium experienced a significant surge of 8.4% to $935.91, while platinum rose 1.9% to $888.54. Notably, palladium prices recently dipped below those of platinum for the first time since April 2018, prompting physical consumers to buy palladium on price declines.
Silver also saw gains, rising 1.2% to $22.35 per ounce.
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