Gold retreats as traders see slower Fed rate cuts in 2025
Gold prices dip as strong U.S. dollar and rising Treasury yields weigh ahead of the Federal Reserve's policy meeting. Investors await rate cut decisions and economic projections for 2025.
Gold retreats as traders see slower Fed rate cuts in 2025
Dec 17 (Reuters) - Increased expectations about the Federal Reserve's final policy meeting of the year and a gradual pace of Fed rate cuts into 2025 made investors flock, resulting to a decline in gold prices on Tuesday, burdened further by a strong U.S. dollar and rising Treasury yields.
As of 01:41 p.m. ET (1841 GMT), spot gold dropped 0.2% at $2,647.81 every ounce. ‘U.S. gold futures’ was also down 0.3% at $2,662.
Following the 0.1% increase of dollar, the gold market became costly for the holders of other currencies. Yields on U.S. 10-Year Treasury bonds touch a four-week high, just ahead of the Federal Reserve meet during which it is expected to cut rates by 25 basis points on Wednesday.
There is also keen interest in the economic projections of the Federal Reserve and the dot plot; they might change the expectations regarding the path of rates through 2025 and 2026.
"The only question is whether the Fed would be more hawkish or dovish compared to what the markets anticipate," Fawad Razaqzada, a market analyst at Forex.com said. "With the agenda of Trump, it's made people expect that the Fed would be cautious enough not to open the possibility to further rate cuts as of now."
As per CME's FedWatch tool, the likelihood of a cut by 25 basis points this week is pegged at 95%, but that for a cut in January is only about 16%.
"Proceeding into the Fed assembly, the risk for gold is basically on the downside," explained Zain Vawda, market analyst at MarketPulse by OANDA.
Bullion typically does pretty well in a low-interest environment.
Meanwhile, U.S. retail sales exceeded forecasts by a greater step in November, adding to spicier inflation results in recent months, making the Fed think about not cutting at this coming January.
Key data on GDP as well as inflation figures in the United States later this week will also be under the scrutiny of traders.
In the rest of the metals, the price of spot silver fell 0.10% to $30.51 an ounce, while platinum lost 0.30% to reach $938.48, and palladium recorded a decline of 1.20% to $935.39.
