Gold rebounds amid Fed rate cut uncertainty
As gold claws back losses, uncertainty over Fed rate cuts persists. Investors cautious as dollar strength influences precious metal.
Gold prices regained ground after dipping to $2029 due to a stronger US dollar and uncertainty surrounding Federal Reserve interest rate cuts. Investors hesitated to move away from the dollar, impacting assets like gold. The metal closed positively in 2023 with hopes of rate cuts by March 2024 but faced profit-taking and reduced expectations in the new year.
The Federal Reserve's December meeting minutes lacked clarity on rate cut timing, prompting a further dip in gold. While most officials projected a potential 75 basis points reduction in 2024, there was no clear agreement on the timeline. The central bank acknowledged progress in curbing inflation but stressed the need for cautious monetary policies due to increased economic uncertainty.
Despite a slowing US economy, inflation above the 2% target, and a resilient job market, the timing of rate cuts remains uncertain. The CME Fedwatch tool suggests a 65% chance of a 25 basis point rate cut in March, down from over 70% earlier in the week.
Gold, though starting weaker in 2024, maintained a 10% gain from 2023. It is expected to benefit from potential interest rate cuts this year as higher rates increase the cost of investing in bullion.
