In the wake of a stronger U.S. dollar and higher Treasury yields, gold is bound for its worst week in over a month. This movement in gold prices is anticipated following comments from U.S. Federal Reserve (Fed) officials indicating a possible delay in interest rate cuts.
As of 1:58 GMT, spot gold rose to $2,023.52 per ounce. This represents a 0.1 percent increase. Despite this minor uptick, the yellow metal has recorded a decline of 1.2 percent over the week. Simultaneously, U.S. gold futures had a modest increase, reaching $2,025.40, up 0.2 percent.
Monitoring the dollar and Treasury yields
Market participants have been closely watching the U.S. dollar index this week. Although the index showed a decrease of 0.2 percent for the day, it has seen an almost 1 percent increase in the past week. As the dollar rises, gold becomes more expensive for holders of other currencies, dampening its appeal.
In the bond market, yields on the benchmark U.S. 10-year Treasury notes have hit a five-week high. Figures have already hit 4.1632 percent. This increase reflects a growing sentiment among investors about the strength of the U.S. economy and the potential for delayed interest rate cuts by the Fed.
According to data released on Thursday, there has been a decrease in U.S. jobless claims last week. At 187,000, this metric reached its lowest level since late 2022. It indicates not just a robust job growth but a stronger economy overall. With the economy showing signs of strength, the Fed might be less inclined to cut rates.
Read: Oil prices rise as OPEC forecasts strong global demand and weather disrupts U.S. production
Rate cut anticipations
According to LSEG’s interest rate probability app, IRPR, the market is now betting on 139 basis points of rate cuts, down from 150 basis points a week earlier. In addition, the odds of a Fed rate cut in March have dropped to 54 percent, a significant decline from about 71 percent last week.
Atlanta Federal Reserve President Raphael Bostic has also recently hinted at the possibility of lowering rates sooner than expected. However, it will still depend on the pace of inflation decline. For now, the broader expectation remains that rate cuts will begin in the third quarter.
These speculations on rate cuts are not only affecting gold prices. The global market for other precious metals has also seen some fluctuations. For instance, spot silver rose slightly by 0.1 percent to $22.76 per ounce. On the other hand, platinum increased by 0.2 percent to $908.65, while palladium gained 0.8 percent, reaching $945.24.
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