- Gold hits a two-week low amid market adjustments.
- Traders expect a smaller 25-basis-point rate cut from the Fed.
- Economic data later this week will influence Fed rate cut decisions.
Gold prices have reached their lowest level in nearly two weeks, falling for the fourth consecutive session.
The drop is attributed to market expectations that the Federal Reserve will implement a modest 25-basis-point rate cut rather than a more significant 50-basis-point reduction. Spot gold is trading at $2,486.99 per ounce, with US gold futures at $2,518.30.
Gold Slips as Fed Rate Cut Bets Shift
The anticipation of a smaller rate cut has led traders to adjust their positions, contributing to the pressure on gold prices. This adjustment comes as investors prepare for upcoming US economic reports, which could provide further insight into the Fed’s future monetary policy. The data will be critical in determining whether the Fed will stick with the expected smaller cut or opt for a larger reduction.
The recent drop in gold prices is further compounded by traders needing to cover margin calls linked to weaker equity markets. Analysts, including Peter A. Grant of Zaner Metals, highlight that the prospects for a larger rate cut have diminished, impacting gold’s appeal as an investment.
As the Federal Reserve’s policy meeting approaches, the market will be closely monitoring economic data releases this week. These reports, including employment figures and jobless claims, are expected to influence the Fed’s decision on rate cuts and, consequently, the trajectory of gold prices.
The current downturn in gold prices reflects changing expectations for the Federal Reserve’s upcoming policy meeting. As markets brace for a smaller rate cut, gold’s appeal has waned, with upcoming economic data likely to play a crucial role in shaping future price movements.
“The pressure has largely been associated with an expectation that the Fed’s going to only cut by 25 basis points in September,” said Peter A. Grant.
