Gold prices fell in global markets during trading on Thursday, amid the rise of the US dollar. This decline came after the release of a series of economic data that showed continued strong inflation in the United States. This data raised concerns about the Federal Reserve’s policy, which may take a cautious approach to interest rate cuts in the near future.
The rise in the US dollar index has weakened the attractiveness of gold for investors. When the dollar rises, gold becomes less attractive, as it holds a strong position in the markets. Since gold is priced in dollars, the rise of the US currency increases the cost of gold for investors holding other currencies.
Some analysts point out that rising inflation may enhance the likelihood of interest rates remaining high for a longer period. This may lead to further pressure on gold, which is traditionally considered a safe haven in times of high inflation. Investors are now in a state of anticipation, as they closely monitor the upcoming economic trends in the United States.
Prices are expected to continue to face significant volatility in the short term, especially with the persistence of inflationary pressures. Despite the current decline in gold, some experts believe that the market may witness a shift in the event of changes in US monetary policy or the emergence of new economic data that affects the dollar.
In light of these movements, gold remains an asset that attracts the attention of investors seeking to preserve the value of their investments amid economic risks. Gold prices will likely remain volatile in the coming days, as concerns about the continuation of inflation keep the market in a state of cautious anticipation.
Inflation and Federal Reserve Policies: Expectations and Future Challenges
The global economy is in a state of anticipation due to the US Federal Reserve’s policies, especially regarding inflation and interest rates. Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, said that markets are closely watching the interest rate cuts by the Federal Reserve. The latest core personal consumption expenditure (PCE) data showed a slowdown in inflation, which sparked some optimism in the markets. However, expectations indicate that the Fed’s policy next year may be less flexible than previously expected.
Despite the slowdown in inflation, the Federal Reserve continues to strive to achieve its goal of reducing inflation to 2%. However, there are significant challenges that may hinder this goal, including the increasingly complicated global trade tensions. The Fed will likely struggle to implement large interest rate cuts in the current economic conditions, especially if trade tensions persist.
The Fed will likely struggle to implement large interest rate cuts in the current economic conditions, especially if trade tensions continue. Expectations of higher tariffs under the administration of President-elect Donald Trump are raising increasing concerns among investors. These tariffs may negatively impact the US economy and increase inflation pressures.
According to the US Interest Rate Tracker, markets currently expect a 68.2% chance of a quarter-point rate cut in December. This comes at a critical time as the Fed seeks to balance controlling inflation and stimulating economic growth. If the cut is implemented, it could provide some support to global markets that are suffering from slowing growth.
Global Economic Challenges:
Continuing trade tensions, along with domestic and global challenges, could make it difficult for countries to take effective economic measures. If inflation continues to rise, the US central bank’s monetary policies will remain under close scrutiny.
Gold Trades Under Pressure Amid Economic and Geopolitical Influences
Gold is one of the most prominent safe-haven assets that investors resort to during times of economic or geopolitical instability. This is especially evident during times of trade wars or tensions between countries. Many investors prefer gold because it maintains its value during times of financial crises, making it a safe haven when markets are volatile.
At the moment, trading is expected to be quiet, as US markets are witnessing the Thanksgiving holiday. This holiday may contribute to a decrease in business activity, which may lead to weak trading movement in gold during this period. However, analysts expect that the pressure on gold may continue over the next few days and even the next two weeks.
According to Kelvin Wong, an analyst at OANDA, gold may be subject to additional pressure in the short term. However, he added that the general trend for gold in the long term remains bullish. Wong believes that there are factors that support gold in the long term, despite the current challenges. In terms of recent data, the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, revealed that its holdings fell by 0.10% to 878.55 metric tons on Wednesday. This slight decline in holdings may reflect some hesitation in the market at the moment.
Current Gold Prices and the Impact of the Dollar
In terms of prices, spot gold fell slightly by 0.1% to $2,633.31 per ounce. US gold futures also fell by 0.4% to $2,632.80. Gold reacts strongly to movements in the US dollar, as its performance negatively correlates with the strength of the dollar.
At the same time, the US dollar index rose by 0.28% to 106.33 points. This rise in the dollar contributes to reducing the attractiveness of gold for investors holding other currencies.
Other Metals Performance
Apart from gold, other metals recorded mixed movements in the markets. Spot silver fell 0.7% to $29.87 an ounce, reflecting the market’s impact on precious metals in general. Platinum, on the other hand, rose 0.4% to $931.00, while palladium rose 0.6% to $978.27. These moves indicate the divergence in the performance of precious metals, as economic and geopolitical conditions affect each metal differently.
Expectations indicate that gold may face further pressure in the short term due to the effects of the US dollar and other factors. However, in the long term, gold remains an attractive option for investors seeking to preserve the value of their money in times of crisis.
