Gold prices dropped 0.79% on Tuesday, extending losses for the fifth consecutive day. The precious metal stabilized near $2,620, its lowest point in over two weeks, as expectations for a larger Federal Reserve (Fed) rate cut diminished. The strength of the US dollar (USD) and reports of a potential ceasefire in the Middle East are also putting pressure on safe-haven assets like gold. Technical selling following a break below the $2,630 support level further contributed to the decline.
Investors are now pricing in an 87% probability of a 25-basis-point rate cut by the Fed in November, with an overall 50 bps reduction expected by the end of the year. New York Fed President John Williams indicated that gradual interest rate cuts are appropriate, with the September 50-bps cut serving as a guide for future policy actions.
Today’s main event is the release of the FOMC Minutes, which could bring volatility to the market depending on the tone of the discussion. If the minutes are perceived as dovish, gold prices may rally towards the key resistance level at $2,640. Conversely, a hawkish stance could push prices lower towards $2,590.
Fed’s Less Dovish Stance and Eurozone Economic Slowdown Impact Euro
The euro failed to break above the crucial 1.10000 level on Tuesday but managed to gain 0.05% against the US dollar. EUR/USD is currently trading in a range of 1.09500–1.10000 as markets assess the outlook for rate cuts by both the Fed and the European Central Bank (ECB). Concerns about the Middle East conflict and slowing Chinese economy continue to weigh on market sentiment.
Recent economic data from the eurozone suggests slowing growth, increasing the likelihood of another ECB rate cut next week. ECB policymaker Yannis Stournaras expects further easing in 2025 as inflation continues to decline.
USD/JPY has been volatile following comments by Japan’s Prime Minister Shigeru Ishiba, who criticized easy monetary policies. The market will be closely watching the release of the FOMC Meeting Minutes for further insights into the central bank’s rate-cut policy.
Analysis:
Gold prices are under pressure as fading expectations for a larger Fed rate cut and strength in the US dollar weigh on the precious metal. The release of the FOMC Minutes could provide more clarity on the central bank’s future policy actions, impacting gold prices. Additionally, concerns about the eurozone economic slowdown and the Japanese yen’s volatility add to the market uncertainty. Investors should monitor these developments closely to make informed decisions about their investments and finances.
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