Gold prices declined in Asian trading today, Tuesday, and remained significantly lower than their recent peaks as fears of long-term US interest rate hikes increased ahead of the Federal Reserve’s meeting this week.
The decrease in demand for safe havens also had an impact, especially as recent reports have shown a decline in geopolitical concerns. This has made gold more susceptible to risks associated with interest rates. However, despite the recent declines, gold prices continue to trade up by over 4% for the month of April, continuing the excellent gains seen in March.
The focus is now directly on the Federal Reserve’s meeting later this week, where it is widely expected that the central bank will keep interest rates steady. However, Federal Reserve Chairman Jerome Powell is expected to provide more hawkish forecasts regarding interest rates, especially after a series of hot inflation readings.
Steady inflation signs have led traders to largely price in expectations of near-term interest rate cuts by the Federal Reserve. It is now expected that the central bank will only lower interest rates in September, or the fourth quarter, if at all.
Long-term interest rate hikes do not bode well for gold, as they increase the opportunity cost of investing in the yellow metal. Additionally, the strength of the dollar, against the backdrop of expectations of interest rate stability, has put pressure on broader metal markets.
