Gold prices fell on Tuesday after reaching a high of $2,450. The price dropped below $2,431 as the US dollar got stronger. With not much new economic data, traders focused on comments from Federal Reserve officials about possible interest rate cuts.
Gold Prices Drop Due to Market Changes
Gold (XAU/USD) is now priced at $2,418, a decrease of 0.28% after reaching $2,433 earlier. As US stock markets went up, gold became less appealing as a safe-haven investment. Even though gold is a popular choice to protect against inflation, many investors are staying with the profitable US stock market.
Federal Reserve’s Role in Gold Prices
Federal Reserve officials have hinted that they will keep interest rates the same until inflation decreases. However, US Treasury bond yields went down. The 10-year Treasury note yield fell by 3.5 basis points to 4.41%, and the yield on the 10-year Treasury Inflation-Protected Securities (TIPS) dropped by 3 basis points to 2.081%, which often has the opposite effect on gold prices.
The Commodities Futures Trading Commission (CFTC) also noted that hedge funds increased their bets on gold futures, bringing it to a three-week high by May 14.
Economic Data Impacting Gold Prices
This week’s US economic reports include the Federal Reserve meeting minutes on Wednesday. On Thursday, data on jobless claims and the Chicago Fed National Activity Index will be released, which might show signs of a slowing labor market. These reports could affect gold prices further.
Gold Prices Drop Despite Weaker US Dollar
Gold prices also fell as US Treasury yields declined and the US dollar weakened. The US Dollar Index (DXY), which measures the dollar’s value against other major currencies, held steady at 104.64. This prevented gold from gaining much value.
Recent inflation reports showed slower price increases, leading traders to think the US central bank might adopt a looser monetary policy. However, Federal Reserve officials have warned against expecting rate cuts too soon.
Fed Officials’ Views on Interest Rates
Atlanta Fed President Raphael Bostic emphasized the need to avoid quick interest rate cuts, aiming for stability to manage inflation. Fed Governor Christopher Waller saw some progress in April’s Consumer Price Index (CPI) but mentioned that more consistent data is needed before considering rate cuts.
Vice-chair Michael Barr and Cleveland Fed President Loretta Mester shared similar views, both pointing out that inflation risks still exist. Based on data from the Chicago Board of Trade, investors now expect the Federal Reserve to reduce rates by 35 basis points by the end of the year.
Technical Analysis of Gold’s Price Movement
From a technical perspective, gold prices have dipped below the key $2,450 level, with the next target being $2,400. If the price continues to fall, it could signal a more significant downward trend for gold.
For more insights and updates on gold market trends, visit Daily Gold Signal. Stay updated on the latest gold price changes to make informed investment decisions.
