As traders awaited word on the precise amount of the Federal Reserve’s interest rate cut, gold prices saw a slight increase during Wednesday’s Asian trading session, maintaining recent record highs.
This week, as expectations for a 50 basis point cut grew, gold prices briefly reached all-time highs, which hurt the dollar and Treasury yields. However, some better-than-expected U.S. data clouded the outlook for a significant rate cut.
By 00:16 ET (04:16 GMT), spot gold had increased by 0.2% to $2,574.15 an ounce, while gold futures had increased by 0.3% to $2,600.40 an ounce.
Gold’s main source of support was the Fed’s increasing conviction that it will lower interest rates at the end of its meeting later on Wednesday.
Markets were initially divided on whether to cut by 25 or 50 basis points, but according to CME Fedwatch, expectations have shifted in favour of a 50 bps reduction in recent sessions.
Even when recent retail sales and inflation data were stronger than anticipated, suggesting some resiliency in the US economy, bets on a 50 basis point cut remained.
However, the Fed is anticipated to begin an easing cycle due to worries about a contracting labour market, which could result in interest rates falling by at least 100 basis points by the end of 2024.
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