Gold prices ended Monday’s European trading session flat after a volatile start to the week, as traders looked ahead to the release of the minutes from the US Federal Reserve’s recent policy meeting.
The precious metal fell in early trade to $1,965 per ounce before recovering to close at $1,979, unchanged from the Asian open.
Market participants are now pricing in the possibility that the Fed could start cutting interest rates as early as March 2024, according to CME Group’s FedWatch tool. However, the tool shows only a 30% probability of rate cuts next year.
In the near-term, attention remains focused on Tuesday’s release of the minutes from the Fed’s October meeting, where policymakers signalled rates would remain higher for longer to combat inflation.
While the Fed is expected to pause its aggressive rate hikes, elevated rates for longer dampen gold’s appeal by increasing the opportunity cost of holding non-yielding bullion.
The Fed minutes will be closely watched for any hawkish signals that could stall gold’s recent upward momentum. Dovish minutes hinting at a potential pause in rate hikes could pave the way for gold to make another run towards the key $2,000 level. However, indications of continued tightening in the minutes would likely exert further downward pressure on prices.