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2024/11
Easing Rate Cut Expectations: Gold Prices Drop Sharply, Likely to Consolidate or Weaken This Week
Gold prices plunged over 4% last week, marking the steepest weekly drop in more than three years, as U.S. President-elect Donald Trump’s policies dampened expectations of Federal Reserve rate cuts. Whether the current decline has bottomed remains uncertain, with most analysts predicting a bearish or flat trend for gold this week.
On Friday, November 15, gold futures fell 0.11% to settle at $2,570.10 per ounce, extending the week’s losses to 4.63%. Spot gold dropped 0.12% to $2,562.32 per ounce, with a weekly decline of 4.56%.
Inflation Concerns and Rate Hike Expectations Impact Gold
Many economists believe Trump’s tariff policies could trigger inflation, potentially affecting the Federal Reserve’s pace of rate cuts. Higher interest rates reduce the appeal of holding gold, which does not generate income, while the strong U.S. dollar makes dollar-denominated gold more expensive for holders of other currencies.
The U.S. Dollar Index surged 1.6% last week to 106.67, weighing heavily on gold prices.
Powell: No Rush to Lower Rates
According to Reuters, Federal Reserve Chair Jerome Powell stated last Thursday, November 14, that the Fed is in no hurry to lower interest rates. Following Powell’s comments, the CME FedWatch tool showed the probability of a 25-basis-point rate cut in December dropping to 62%, down significantly from 83% the previous day.
Market Sentiment: Analysts and Retail Investors Bearish on Gold
The latest weekly gold survey from Kitco reveals strong bearish sentiment among industry experts. Retail investors are also increasingly cautious about gold’s near-term outlook.
Outlook
- Gold prices are expected to remain under pressure due to a stronger dollar, high interest rates, and waning rate-cut expectations.
- Investors will closely monitor upcoming economic data and any shifts in Federal Reserve policy guidance for further direction.
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