Gold prices maintained their stability on Tuesday as investors kept a watchful eye on potential rate cuts by the U.S. Federal Reserve in 2024. Spot gold dipped by 0.1% to $1,936.19 per ounce, while U.S. gold futures fell by 0.3% to $1,961.80, following a U.S. holiday on Monday.
Market analysts are closely monitoring the possibility of rate cuts in 2024 and their potential impact on the precious metal. Harshal Barot, a senior consultant at Metals Focus, commented on the situation, stating, “Much remains to be seen if rate cuts in 2024 follow and to what extent.” Barot also noted that the expectation of U.S. rates remaining higher for an extended period could limit the upward momentum of gold prices.
The direction of gold prices depends on whether the U.S. economy experiences a soft landing. If this scenario unfolds, there may be a downside risk for gold as aggressive rate cut expectations in the latter half of 2024 could be scaled back. Investors are cautiously observing recent U.S. economic data, which has bolstered the notion of a soft landing and reduced concerns about inflation and recession. These factors have solidified expectations that the Federal Reserve may not need to implement further interest rate hikes.
Gold, as a non-interest-bearing asset, typically loses its appeal when interest rates increase. As Federal Reserve officials prepare to speak in the lead-up to the September 19-20 policy meeting, market participants are eager to gain insights into the central bank’s stance on rates.
According to the CME FedWatch tool, traders currently see a 93% likelihood that the Federal Reserve will maintain interest rates at their current levels during this month’s meeting. Additionally, there is a 60% probability that rates will remain unchanged for the remainder of the year.
NAB Commodities Research anticipates a potential rebound in gold prices with a growing conviction of rate cuts in 2024. They project that gold prices could rise towards an average of $1,968 per ounce in the last quarter of this year.
In the broader precious metals market, spot silver declined by 1.6% to $23.59 per ounce, platinum dipped by 1.1% to $943.28, and palladium eased by 0.7% to $1,213.36. These moves reflect the sensitivity of the precious metals market to shifts in interest rates and economic outlook.
As the Federal Reserve’s policy meeting approaches, market participants will closely monitor any indications of the central bank’s future rate decisions, which will play a crucial role in determining the trajectory of gold prices in the coming months.