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Gold prices see dip on hawkish Fed minutes

May 23, 2024

Key points

  • Analyst prediction: Gold may drift back to $2,355 if the dollar maintains upward momentum.
  • Fed minutes: Indicated discussions of possible further interest rate hikes.
  • ANZ outlook: Rising prices could temper discretionary gold buying.

Gold prices fell for a third consecutive session on Thursday following the release of the latest Federal Reserve minutes, which suggested some officials were inclined towards raising interest rates.

Market reaction after FOMC

  • Spot Gold: Fell 0.6% to $2,365.49 per ounce as of 0638 GMT, after hitting a record high of $2,449.89 on Monday.
  • U.S. Gold Futures: Declined 1.1% to $2,367.60.
Chart displaying XAU/USD exchange rate at 2362.95 with a trend of -0.69%, reflecting a dip in gold prices following hawkish Fed minutes. The chart features moving averages (MA) and MACD indicators, illustrating the impact of higher interest rates, which increase the opportunity cost of holding non-yielding gold. Image hosted by VT Markets, a forex CFDs brokerage

Picture: The downside prevails for gold prices as seen in the VT Markets app.

Gold is typically seen as an inflation hedge, but higher rates increase the opportunity cost of holding non-yielding gold. There is a possibility that gold could drift back to around $2,355 if the dollar continues its upward trend. The medium to long-term outlook for gold remains constructive, contingent on the next Fed rate move being lower.

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Investor sentiment

Traders currently see a 72% chance of a rate cut by November 2024, indicating growing doubts about multiple rate cuts within the year.

India’s gold imports in 2024 could decline by nearly 20% from the previous year due to high prices, leading retail consumers to exchange old jewellery for new.

ANZ noted that a sharp price rise might temper discretionary gold buying in 2024, with fewer auspicious days for weddings in India and China possibly acting as a headwind.

Performance of other precious metals

  • Spot Silver: Fell 0.9% to $30.48.
  • Platinum: Lost 0.6% to $1,028.55.
  • Palladium: Dropped 1.1% to $988.62.

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