Gold prices fell slightly on Monday on the back of a stronger dollar, which limited demand for the yellow metal.
The Federal Reserve’s hawkish tone about interest rate cuts in 2025 also weighed on sentiments.
The price of gold has been struggling since December when the US Fed said it would slow down the pace of rate cuts this year.
The dollar gained grounds after this, while Treasury yields on US bonds also remained elevated.
A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.
At the time of writing, the February gold contract on the COMEX was $2,645.19 per ounce, down 0.4% from the previous close.
Gold had one of the best years in 2024, with prices climbing more than 27%.
Gold’s annual returns last year were the highest since 2010.
Meanwhile, silver prices also rose more than 21% in 2024.
Both precious metals have been favoured by experts to climb further this year.
Silver futures on COMEX were, however, up 0.6% on Monday at $30.247 per ounce.
Fed’s hawkish tone boosts dollar
“The Federal Reserve’s (Fed) hawkish signal that it would slow the pace of interest rate cuts in 2025 remains supportive of elevated US Treasury bond yields and turns out to be a key factor driving flows away from the non-yielding yellow metal,” Haresh Menghani, editor at FXstreet, said in a report.
Recently, Fed officials hinted that the fight against inflation in the US was not over, which could mean that the bank may not cut rates as aggressively as previously anticipated.
The market was expecting at least four rate cuts in 2025, which have now been trimmed to just two cuts.
San Francisco Fed President Mary Daly said on Saturday that despite significant progress in lowering price pressures over the past two years, inflation remains uncomfortably above the 2% target.
Menghani said:
Investors this week will confront the release of important US macro releases, including the closely-watched Nonfarm Payrolls report on Friday, ahead of the next Fed meeting later this month.
Sticky inflation and a resilient labour market in the US have prompted the Fed to re-think its approach towards interest rate cuts.
The Fed had cut rates by a total of 100 basis points over the course of three meetings last year.
Goldman Sachs sees gold prices at $3,000
According to a Reuters report, Goldman Sachs forecasts gold prices to hit $3,000 per ounce by mid-2026 despite recent weakness in the market.
The multinational-investment bank had earlier expected prices to hit $3,000 per ounce by the end of 2024, which failed to materialise.
The bank expects prices to be around $2,900 per ounce by the end of 2025, and hit $3,000 an ounce in 2026.
It said that the delay in hitting the target was due to the slower pace of monetary easing by the US Fed.
Bears awaiting more decline
Gold prices have struggled in the last two months after Republican Donald Trump secured victory in the 2024 US presidential election.
Prices had touched a series of record highs in October, but Trump’s victory led to a surge in the dollar index, weighing on the precious metal.
According to FXstreet, gold prices have a support around the 100-day simple moving average of $2,625 per ounce.
“This is followed by the $2,600 mark, below which the Gold price could drop to the December monthly swing low, around the $2,583 area,” according to FXstreet’s report.
Source: FXstreet
If prices break below these levels, bears could take control of the fall and there could be further losses on the horizon.
On the flip side, resistance for gold remained around the level of $2,681, followed by the $2,700 level.
The post Gold slips as dollar gains: are bears in charge? appeared first on Invezz
