Gold Prices Drop On No Rate Cuts

Gold Prices Drop On No Rate Cuts by Andrew Blumer last updated on February 23, 2024

Gold Prices Drop From $2050 As Rate Cut Expectations Fade Away.

Gold prices experienced a new wave of selling on Monday as the NFP report and fading expectations of rate cuts have strengthened the greenback. The bottom line is that traders can remember any rate cuts in March, ultimately making the greenback a better option than Gold.

Amidst all this, the Gold (XAU/USD) retreated from its highs near $2050, as the nearest timeline for rate cuts is May 2024. Conversely, the greenback is enjoying the situation as it has already made 2-month highs while the bond yields also register gains.

Spot Gold Down By -0.4%

Overall, the spot gold has gone down by -0.4%, which has sent it near the $2031 level. As for the gold futures (April), the trading price is $2047 with a change of -0.3%.

The decline in gold prices started on Friday when the NFP report showed the resilience of the US labour market. This means there's now more headroom and more time for the Federal Reserve before a policy pivot.

The Fed chair recently clarified that they will act with care before considering monetary easing in 2024. And when we consider the recent NFP report, the Fed has nothing to worry about in the short term.

According to the CME Fed watch tool, the odds of a March rate cut have decreased to almost zero. Additionally, the experts are putting their hopes on rate cuts during June.

The fact that current interest rates are still here for a few months could go better with the spot gold and gold futures. As a result, investors are now hesitant to buy Gold in exchange for the greenback.

Despite all this, the one factor pushing the Gold higher is its safe haven demand. The current situation in the Middle East is preventing gold prices from dropping lower.

That's why Gold is respecting the $2000 support level, and the chances of hitting 2023's highs are still on the cards.