Gold Prices Fall as Dollar Rebounds on Fed Rate Cut Uncertainty
Gold prices dip as dollar rebounds in anticipation of Fed minutes
Gold prices took a hit in Asian trade on Wednesday as the dollar regained strength amid uncertainty over the timing of the Federal Reserve’s interest rate cuts in 2024. The yellow metal had seen a strong surge in the final trading days of 2023, with spot gold still trading within $100 of its record high from December. However, markets are now seeking more affirmation regarding the Fed’s plans to begin trimming rates early in 2024, leading to a slight dip in gold prices and a sharp rebound for the dollar from near five-month lows. Gold steadied at $2,064.16 an ounce, while futures expiring in February fell slightly to $2,072.40 an ounce by 00:04 ET (05:04 GMT).
Fed minutes, nonfarm payrolls awaited for more cues
Anticipation of the Fed minutes, due later in the day, kept markets on edge, with analysts cautioning that the minutes may not be as dovish as expected. While the Fed has signaled plans for rate cuts in 2024, Chair Jerome Powell has provided limited cues on the timing or scale of the rate cuts. Despite this, traders are pricing in a nearly 70% chance of a 25 basis point rate cut in March 2024. The minutes come ahead of key nonfarm payrolls data due this Friday, expected to offer more insight into the labor market, a crucial factor for the Fed’s interest rate decisions.
Copper down on fresh China worries
Meanwhile, copper prices fell slightly on Wednesday, extending recent losses following weak economic data from top importer China. Copper prices were pressured by strength in the dollar and concerns about a post-COVID economic rebound in China, which failed to materialize in 2023. Markets were also awaiting U.S. data for December, which is due later on Wednesday.
Overall, the uncertainty surrounding the Fed’s rate cut timeline continues to influence the precious metals and industrial metals markets, with traders closely monitoring key economic data for more cues.
