Gold Slips as Dampened Fed Rate Cut Hopes Dent Appeal

Higher rates reduce the appeal of holding non-yielding gold.

SEATTLE (Scrap Monster): Gold prices eased on Monday amid fading expectations for early U.S. interest rate cuts this year, while focus shifted to the Federal Reserve policy meeting and U.S. non-farm payrolls data due this week.

Spot gold fell 0.2% to $2,334.20 per ounce by 0730 GMT. U.S. gold futures were down 0.1% at $2,345.90.

'Gold is facing some challenges given the likely delayed timeline for rate cuts. However, if gold can remain in the $2,200-$2,350 range, it will be well positioned to capitalise on any potential downturn in U.S. macro data in coming quarters,' said Tim Waterer, chief market analyst at KCM Trade.

Markets are focusing on the Fed's policy meeting from April 30-May 1 and the non-farm payrolls data due on Friday. The Fed is seen holding its benchmark interest rate steady at 5.25%-to-5.5% at this meeting.

'If we happen to hear a hawkish tilt from (Fed Chair) Jerome Powell this week, combined with another solid jobs print, gold could be facing a test of some key support levels on the downside,' Waterer said.

Investors are pricing in a single rate cut this year in November, according to the CME's FedWatch tool after a batch of sticky U.S. inflation data and hawkish rhetoric from Fed officials including Powell.

Higher rates reduce the appeal of holding non-yielding gold.

'A seasonal pullback in regional demand is probable into mid-2024, but a structurally stronger consumption trend via the retail and PBOC (People's Bank of China) channel is supportive of a higher gold price floor, boosting the base case for $3,000 over the next 12-15 months,' Citi research wrote in a note, adding that CNY devaluation fears may enhance local buying.

Spot silver edged up 0.2% to $27.23 per ounce and spot platinum was up 0.3% to $918.40, while palladium slipped 0.2% to $952.50.

Courtesy: www.reuters.com

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