Gold Prices Rise Slightly Amidst Expectations of Delayed U.S. Interest Rate Cut
Gold edged up on Monday, reaching $2,338.85 per ounce, after hitting a two-week low of $2,325.19 on Friday. However, the precious metal has seen a significant dip from its record high of $2,449.89 earlier last week. The rise in gold prices comes as investors scaled back their expectations of a U.S. interest rate cut following the Federal Reserve’s latest meeting, which suggested a delay in monetary policy easing.
Fed Signals Slowdown in Rate Cuts
The minutes of the Federal Reserve’s April 30-May 1 meeting revealed that Fed officials anticipate it will take longer than previously expected to gain confidence in inflation moving towards the target of 2%. Traders are now expressing doubts about the likelihood of multiple rate cuts in 2024, with the CME FedWatch Tool currently pricing in a 62% chance of a rate cut by November.
Impact of Interest Rates on Gold
Gold is often sought after as an inflation hedge, but higher interest rates can increase the opportunity cost of holding non-yielding assets like gold. The uncertainty surrounding the Fed’s rate cut plans is likely to continue influencing gold prices in the near future.
Additional News and Events
In other news, five people were reported dead and several others missing after an informal gold mine collapsed in northern Kenya. Additionally, BHP is facing pressure from Anglo American investors for a simpler offer or a cash sweetener in a potentially historic deal in the mining industry. On a different note, China’s industrial profits rose by 4.3% in the first four months of this year compared to the same period last year.
Other Precious Metals
Meanwhile, spot silver rose by 0.8% to $30.59 per ounce, platinum saw a 1.2% increase to $1,037.90, and palladium gained 1.6% to $979.25.
Upcoming Data and Events
Upcoming data to watch includes Germany’s Ifo Business Climate, Current Conditions, and Expectations for May.
Insight:
The fluctuation in gold prices in response to news about the U.S. interest rate cut highlights the metal’s sensitivity to changes in monetary policy. Investors will continue to monitor future Fed announcements for indications of potential rate adjustments, which could further impact gold prices in the coming months. Additionally, the tragic incident in the gold mine in Kenya serves as a stark reminder of the risks associated with the gold mining industry, both in terms of safety and stability.
