Gold prices continued to hover around $2,031 on Thursday, following hawkish Fed policy guidance this week. While four central bank officials emphasized delayed rate cuts, heightening Middle East tensions lend support. Still, the reduced likelihood of near-term easing dims gold’s allure as a non-interest-bearing asset.
Boston Fed President Susan Collins and counterparts from Minneapolis, Richmond, and the Fed Board downplayed imminent policy loosening despite receding inflation. Their messaging echoes that of Chair Jerome Powell, who said rates will stay higher until price stability solidly returns.
Markets now expect the first 2024 cut to be in May rather than March. This higher-for-longer outlook curbs the incentive to hold gold with no yield. As Fed tightening drove gold down about 3% last year, delayed easing policy provides little upside catalyst for now.
Also read: Gold Price Dips Below $2030; Here’s How It Will Perform in February
Gold prices rise amid geopolitical tension
As gold often rises amid geopolitical unrest, boosting its safe-haven appeal, tensions with Iran could offset headwinds from prospective Fed policy. Though delayed rate cuts weigh on prices, conflict in the region caps losses.
Looking ahead, consumer price data from China due on Thursday may influence gold trading. Figures matching December’s 1.8% print would further ease global inflation fears. This may reinforce the Fed’s patient stance and pressure gold slightly.
So with the Fed projecting protracted tightening absent inflation erosion, gold appears rangebound around $2,000 in the near term. However, substantial geopolitical flare-ups could countervail hawkish policy, keeping the gold bid above support. The precious metal awaits clearer signals on both fronts for its next major move.