Gold Prices Steady Amid Strong Dollar and Reduced Rate Cut Expectations

This uptick in the dollar's strength makes gold more expensive for holders of other currencies.

Gold prices remained unchanged on Tuesday, staying near a one-week low reached in the previous session as the U.S. dollar maintained its strength.

This resilience in the dollar is driven by increasing expectations that the Federal Reserve will not pursue aggressive rate cuts throughout the year.

As of 1218 GMT, spot gold held steady at $2,025.53 per ounce, following its decline to its lowest level since January 25 in the previous session.

Meanwhile, U.S. gold futures saw a minor dip of 0.1%, settling at $2,041.60 per ounce.

Han Tan, the chief market analyst at Exinity Group, noted, “Gold bulls have been slammed by stronger-than-expected US economic data and have been forced to revisit lower levels as markets continue to lower their bets for a Fed rate cut in March.”

He added that gold may see an upswing as the first Fed rate cut approaches.

However, any delays in the central bank’s policy shift could lead to a retracement of recent gains in the precious metal.

The U.S. dollar saw a 0.1% increase, nearing its highest level in three months.

This uptick in the dollar’s strength makes gold more expensive for holders of other currencies.

Additionally, yields on the 10-year Treasury notes held steady above 4%.

Two Federal Reserve members have indicated that inflation could continue to decrease due to the strong economy, suggesting that the central bank might take its time before considering interest rate reductions.

Fed Chair Jerome Powell emphasized that the Fed could be “prudent” in deciding when to cut its benchmark interest rate, as a robust economy allows central bankers the opportunity to gain confidence in further inflation reduction.

According to CME Fed Watch Tool, traders currently estimate a 65% chance of a U.S. rate cut in May.

Lower interest rates tend to increase the attractiveness of non-yielding assets like gold.

Investors are eagerly awaiting insights from eight Fed speakers scheduled to address the public this week for additional indications regarding the timing of potential rate cuts.

In the precious metals market, spot silver experienced a 0.4% decrease, falling to $22.27 per ounce.

Palladium witnessed a more substantial decline of 1.5%, reaching $934.25, and platinum also saw a 0.5% loss, settling at $892.38 per ounce.