The price of gold remained almost unchanged as market participants took a wait-and-see approach ahead of the publication of the minutes of the January Fed meeting.
The FOMC meeting minutes, which will be presented at 19:00 GMT, can provide insightful information about the ongoing debates around interest rates this year, while any hawkish position is likely to resume fluctuations in rates expectations. Most likely, the path to interest rate reductions will be more gradual, with most cuts expected in the second half of the year. This aligns with the Fed’s strategy to ensure a sustained decrease in inflation before easing monetary policy. The upcoming Fed meeting and the subsequent forecast update will be crucial in shedding more light on the Fed’s policy outlook. According to the CME FedWatch Tool, markets see a 35.8% probability of a 25 basis point rate cut at the Fed meeting in May, and a 77.5% probability of a rate cut in June, with approximately 90 basis points of cuts priced in for this year.
Meanwhile, the fall in gold prices was limited by the escalation of tensions in the Middle East. The Iran-aligned Houthis persisted in their attacks on shipping lanes in the Red Sea and Bab al-Mandab Strait, with at least four more vessels hit by drone and missile strikes since Friday.
A slight pressure on prices was exerted by the positive dynamics of the US currency. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, Canadian dollar, pound sterling and Swedish krona) rose by 0.06% to 104.13.