Gold Prices Drop Sharply Amid Reduced Rate Cut Expectations from the Fed
Global gold markets experienced a notable sell-off at the close on Friday, November 14, resulting in a price decline of more than 3%. This downturn was driven by aggressive statements from U.S. Federal Reserve officials, which diminished investor expectations for an interest rate cut in December.
By the end of the session, spot gold prices fell 1.82% to $4,095.16 per ounce, after reaching a peak of $4,211.06 in early trading. Despite this daily decline, the yellow metal recorded a weekly gain of 3.7%.
Similarly, U.S. gold futures for December dropped 2.24%, closing at $4,100.40 per ounce.
The recent U.S. government shutdown, the longest of its kind, which ended on Thursday, created a significant gap in economic data, leaving the Federal Reserve in a state of uncertainty ahead of its scheduled monetary policy meeting next month.
Investors had hoped that new economic data would indicate a slowdown, potentially giving the Federal Reserve "room to cut interest rates in December," a factor that typically enhances the appeal of gold as a non-yielding asset.
However, these expectations began to wane as more Federal Reserve policymakers adopted a cautious stance regarding further monetary easing, as indicated by market analysis.
Market expectation tools reflected this shift, with the CME Group's FedWatch tool showing that the likelihood of a 25 basis point rate cut next month fell to 53%, down from 64% earlier in the week.
It is important to note that non-yielding gold tends to perform well during periods of economic uncertainty and in low interest rate environments, making it sensitive to changes in monetary expectations.
