Gold prices come to a halt amid Fed's rate hike cycle

Gold prices have stalled amid speculation regarding the Federal Reserve’s potential plans to conclude its rate hike cycle. The precious metal saw significant gains on Tuesday following data indicating lower-than-expected growth in U.S. retail sales for June, suggesting a potential decrease in consumer inflation.

However, the strength of the dollar, which rebounded sharply from 15-month lows, limited the extent of the price increases for gold. Analysts predict heightened demand for the greenback leading up to the upcoming Federal Reserve meeting.

By 11:00 GMT, spot gold declined by 0.2% to $1,977.03 per ounce.

The softer-than-expected retail sales data has led traders to factor in a greater likelihood of the Federal Reserve announcing a pause in its rate hike cycle next week.

Although the central bank is widely anticipated to raise rates by 25 basis points, concerns are emerging about its capacity for future increases, given indications of easing U.S. inflation and economic growth.

The potential pause in the Fed’s rate hike cycle could have positive implications for non-yielding assets like gold, which have faced challenges due to significant interest rate hikes over the past year.

Nevertheless, it is expected that gold’s gains will remain somewhat constrained, considering that U.S. interest rates are likely to stay elevated for an extended period.