Gold prices recover from dip as Powell counters rate cut expectations

Central banks' record gold buying drives demand to new heights
Gold prices recover from dip as Powell counters rate cut expectations

Spot gold rebounded on Thursday and is currently being traded at $2,041.48 per ounce. However, on Wednesday, gold prices experienced a dip in response to the Federal Reserve Chair Jerome Powell’s opposition to the anticipation of a U.S. rate cut by March. Spot gold witnessed on Wednesday a slight decline of 0.1 percent, settling at $2,034.37 per ounce by 03:10 p.m. ET (20:10 GMT), following an earlier increase of 1 percent. U.S. gold futures, on the other hand, declined by to reach 2.057.2 from $2,067.4.

Read more: Gold continues upward trend, surpasses $2,030 mark

Although the U.S. central bank maintained the interest rates unchanged, Powell dismissed the possibility of rate cuts in the spring, contrary to what many market participants had anticipated. While Powell’s remarks contained some dovish elements, his key statement of “not March” should temporarily appease those hoping for a rate cut, according to Tai Wong, an independent metals analyst based in New York.

Wong also remarked that gold has demonstrated remarkable resilience, but its performance will be closely scrutinized in light of incoming data. The dollar index recovered from its losses, and 10-year U.S. Treasury yields dropped to nearly three-week lows following the Federal Reserve’s decision.

Daniel Ghali, a commodity strategist at TD Securities, expressed the belief that robust demand from physical buyers and central banks will persist for gold. This sentiment is supported by data revealing that U.S. private payrolls in January rose significantly less than anticipated.

Gold demand to hit record with central-bank buying

According to the World Gold Council (WGC), total gold demand reached a record high last year and is projected to continue expanding in 2024 as the U.S. Federal Reserve contemplates reducing interest rates. The WGC’s full-year report indicates that overall consumption increased by approximately 3 percent, reaching 4,899 tons, driven by strong demand in the opaque over-the-counter market and sustained purchases by central banks. This figure represents the highest total since 2010, as per available data.

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