Harvest Global Markets :

Gold prices experienced a significant drop, hitting a more-than three-week low on Thursday. This decline was part of a series of recent losses, driven by cautionary statements from several Federal Reserve officials. These officials warned against assuming that the central bank had concluded its cycle of interest rate hikes. As a result, the precious metal faced its fourth consecutive day in the red, influenced by a stronger dollar and rising Treasury yields. Additionally, the demand for gold as a safe haven diminished, partly due to reduced concerns related to the Israel-Hamas conflict, leading to lower market risk premiums.

In specific figures, gold fell by 0.1% to $1,949.38 per ounce, while gold futures expiring in December dropped by 0.2% to $1,954.30 per ounce. Both these instruments experienced declines of over 2% throughout the week.

The persisting uncertainty stems from a series of warnings from Fed officials, indicating that U.S. interest rates would continue to remain high for an extended period. These cautionary statements countered recent beliefs that the Fed’s rate hike cycle had concluded. Consequently, traders shifted back towards assets vulnerable to interest rate changes, such as the dollar and Treasuries.

Further complicating the situation, Federal Reserve Chair Jerome Powell provided limited insight into monetary policy during a recent address. Although some interpreted his comments as less hawkish, Powell maintained his stance that U.S. rates would remain elevated for a significant duration. This situation does not favor gold, as higher interest rates increase the opportunity cost of investing in non-yielding assets like bullion.

This ongoing scenario has limited substantial gains in the gold market this year, with the precious metal remaining below the coveted $2,000 per ounce level. Despite these challenges, gold has still managed to maintain an overall increase of around 8% in 2023. The market continues to watch Powell’s speeches and Fed developments closely for potential shifts in this complex landscape.