Gold Prices Slip as Fed Officials Rein in Rate Cut Expectations
The gold market is feeling the pinch as comments from Federal Reserve officials over the weekend suggest a more cautious approach to cutting interest rates in 2025. This shift in sentiment has led to a two-day decline in gold prices, with the precious metal trading near $2,630 an ounce.
Fed’s Inflation Fight Takes Center Stage
San Francisco Fed President Mary Daly and Fed Governor Adriana Kugler emphasized the need to finish off the fight against inflation and reach the authority’s 2% target. This stance implies that lower interest rates, which typically benefit gold, may not be on the horizon anytime soon. As a result, gold’s recent surge, which saw a 27% increase last year, may lose steam.
Goldman Sachs Revises Forecast
Goldman Sachs Group Inc. has revised its forecast, no longer expecting gold to reach $3,000 an ounce by the end of the year. Instead, the investment bank predicts this milestone will be reached by mid-2026, citing fewer expected rate cuts from the Fed.
Market Reaction
Spot gold prices dropped 0.5% to $2,627.60 an ounce, following a 0.7% decline on Friday. The Bloomberg Dollar Spot Index dipped 0.1%, while silver prices remained flat. Palladium and platinum prices slipped, reflecting the broader market sentiment.
Economic Data Takes Center Stage
This week, a raft of economic data, including non-farm payrolls and job openings, will be closely watched for clues on the Fed’s easing trajectory. The minutes of the authority’s December meeting are also due this week, providing further insight into the Fed’s thinking. As Donald Trump prepares to return to the White House this month, market participants will be keenly watching these developments.
What’s Next for Gold?
With the Fed’s cautious approach to rate cuts and the revised forecast from Goldman Sachs, gold prices may face headwinds in the short term. However, the precious metal’s long-term prospects remain strong, driven by its safe-haven appeal and limited supply. As the market digests the latest developments, one thing is clear: gold’s price trajectory will be closely tied to the Fed’s monetary policy decisions.
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