Gold prices fell to a one-week low on Thursday, marking their third consecutive session of decline as investors took profits following hawkish signals from the Federal Reserve’s latest meeting. The minutes indicated that interest rates are likely to remain higher for longer, dampening the appeal of non-yielding assets like gold.
As of 0939 GMT, spot gold dropped 0.7% to $2,361.76 per ounce, having earlier touched a low of $2,354.79, its weakest level since May 15. This fall extends the precious metal’s decline from its record high of $2,449.89 on Monday, now down 3.6% from that peak, though it remains above its 21-day moving average of $2,348.6.
“The latest Fed minutes showed officials are in no rush to cut rates. In fact, several questioned if the higher-for-longer policy was restrictive enough,” noted ANZ in a report. This sentiment has led to a surge in net long positions held by investors in gold, reaching their highest levels in over three years. Despite a robust start to the year, with prices up 14.5% following a rally from March to May, traders are increasingly skeptical that the Fed will cut rates more than once in 2024.
The physical demand for gold has remained resilient since 2021. However, ANZ highlighted that the high prices could dampen discretionary buying. In India, the world’s second-largest gold consumer, imports could decrease by nearly 20% in 2024 as consumers opt to exchange old jewelry for new, rather than purchasing additional gold at elevated prices, according to industry experts.
The impact of the Fed’s stance extended beyond gold, with spot silver also retreating by 1.0% to $30.47 per ounce. Silver had surged above $30 to an 11-year high earlier this week, driven by strong performances in gold and copper.
Other precious metals also felt the pressure. Platinum prices slipped 0.5% to $1,029.90, while palladium fell below the critical $1,000 mark, declining by 1.9% to $980.75.
The broader commodities market continues to react to the Fed’s minutes and the associated economic implications. As the year progresses, investors and traders will be closely watching for further cues on the Fed’s policy trajectory and its impact on precious metal prices.