On Tuesday (February 21), the international gold price fell again, but the decline was not large. Investors avoided large-scale positions before the release of the Federal Reserve meeting minutes and important economic data that may affect the Fed’s interest rate hike path. Until there is clear evidence of a slowdown in U.S. economic activity, it will be difficult for gold to start a rally.
At 15:20 Beijing time, spot gold fell 0.27% to $1,836.29 an ounce; the main COMEX gold futures contract fell 0.27% to $1,845.2 an ounce; the U.S. dollar index rose 0.23% to 104.120.
Money markets now expect the Fed to raise rates above 5% in May, with rates peaking at 5.305% in July. Investors will next focus on the minutes of the Fed’s latest policy meeting to be released on Wednesday (February 22) and the January PCE price index to be released on Friday (February 24).
Gold prices have fallen about 6% since hitting their highest level since April 2022 at $1,959.57 an ounce earlier this month. Last week, they hit a low of $1,818.81 an ounce since late December. Concerns that interest rates will remain elevated for longer came after a flurry of data showed a resilient U.S. economy and a tight labor market.
UBS analyst Giovanni Staunovo said: “We still expect gold prices to rise in the next few quarters. But in the short term, I think gold prices will remain volatile until macro data points to a slowdown in U.S. economic activity.”
Ole Hansen, head of commodity strategy at Saxo Bank, said: “The market seems to be preoccupied with the room for further interest rate hikes by the Fed, and investor sentiment has been challenged again. Position contracts have fallen by 16% in the past month. Further weakness in gold may find target support in the $1,792 to $1,776 area, with resistance at $1,872.”
Regarding the outlook for gold prices ahead of the FOMC meeting, Marc Despallieres, Vantage’s chief strategy and trading officer, said: “After opening a mildly negative scenario this week, gold prices are hovering around 1840, awaiting clear directional guidance.”
Christopher Wong, foreign exchange strategist at OCBC Bank, said: “The market is assessing whether the re-betting on the Fed’s hawkish outlook is too fast, and the decline in gold prices has temporarily slowed down. Re-betting on further strengthening of the Fed requires finding new catalysts, and the focus will be on the core On the PCE. Stronger data could see the dollar’s rally gather momentum and weigh on gold; but an unexpected downturn in the data should lead to a pause in Fed hawks’ re-bets and gold could rally.”