Gold Prices Decline for Fourth Straight Session Amid Strong Dollar and Fed Rate Outlook
Gold prices fell for the fourth consecutive session on Tuesday, impacted by a stronger US dollar and increasing expectations that the US Federal Reserve will keep interest rates elevated at its upcoming meeting.
Specifically, spot gold decreased by 0.6%, settling at $4019.87 per ounce. In contrast, US gold futures for December delivery saw a larger drop of 1.5%, reaching $4011.30 per ounce.
The dollar remained stable against a range of currencies following a significant rise in the previous session. This increase in the dollar's value makes gold, priced in US dollars, more expensive for foreign currency holders, thereby dampening demand.
Edward Meyer, an analyst at Marks, noted, "The dollar was somewhat stronger today, and speculative positions have been reduced over the past week. The gold market appears to be moving towards consolidation."
Expectations regarding the Federal Reserve's monetary policy are exerting significant pressure on gold prices. A recent agreement among lawmakers to end the longest government shutdown in US history has reinstated the flow of official economic data, reducing the likelihood of a rate cut in December.
Federal Reserve Vice Chairman Philip Jefferson emphasized on Monday the importance of a cautious approach in any future interest rate cuts, a statement that has further tempered market expectations.
This week, investors are expected to focus on US economic indicators, particularly the non-farm payroll report for September due on Thursday, as they seek insights into the strength of the US economy.
In this context, ANZ noted in a memo that expectations for a Fed rate cut next month have dropped to 42% from nearly 100% immediately after the September decision, impacting investor interest in gold.
However, the memo also expressed a more positive outlook for the medium to long term, stating that structural support factors such as geopolitical risks, concerns over US debt sustainability, moves to reduce reliance on the dollar, and central bank purchases are expected to bolster investment demand.
It is important to note that gold, as a non-yielding asset, typically performs better in environments of low interest rates and economic uncertainty.
In related market movements, other precious metals also experienced declines, with spot silver down 1.2% to $49.58 per ounce, platinum falling 1% to $1517.73, and palladium decreasing 1.5% to $1372.05.
