Gold prices experienced a decline of more than 1% on Tuesday, influenced by a strengthening dollar and higher U.S. Treasury yields. These shifts in the market came in response to Federal Reserve Governor Christopher Waller’s hawkish remarks regarding potential interest rate cuts later in the year. However, the demand for safe-haven assets helped limit the downside for gold.
Gold Declines Over 1% as Dollar Strengthens and Yields Surge in Response to Hawkish Fed Remarks by Waller
According to a Reuters report, spot gold was down by 1.3%, reaching $2,027.26 per ounce, following three consecutive sessions of gains at 2:36 p.m. E.T. (19:36 GMT). U.S. gold futures also settled more than 1% lower at $2,030.2.
A senior analyst at Kitco Metals, Jim Wyckoff, commented:
Strong gains in the U.S. dollar index are pressuring the gold market, along with a rise in U.S. Treasury yields today on this first day back from the three-day holiday weekend. ..However, one could argue that losses in gold are not bad considering the dollar’s strength, as tensions in the Middle East are providing support to prices.
The dollar index surged by nearly 1%, reaching a more than one-month high. This increase made gold less appealing to investors using other currencies. Simultaneously, yields on the benchmark US 10-year Treasury notes saw an uptick.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
Waller emphasised that the United States was “within striking distance” of the Fed’s 2% inflation target. However, he suggested that the central bank refrain from rushing into cuts in its benchmark interest rate until it becomes evident that lower inflation will persist.
It is widely anticipated that the Federal Reserve will maintain its current policy rate following the meeting scheduled for 30-31 January. As indicated by the CME Fedwatch tool, traders are assessing a 67% likelihood of an interest rate reduction occurring in March.
In contrast to these expectations, European Central Bank officials pushed back against the market’s anticipation of swift rate cuts this year.
Spot silver experienced a 1.2% decline in the broader precious metals market, settling at $22.93 per ounce. Platinum also dropped by 2.1%, reaching $895.56, while palladium recorded a 3.8% drop, falling to $934.32, highlighting its lowest level in over one month.
