On September 5, 2023, the gold price in international markets slipped to a one-week low as investors turned to the U.S. dollar following weak data from China. However, the losses were limited due to rising expectations of a pause in interest rate increases by the U.S. Federal Reserve.
As of 1126 GMT, spot gold declined by 0.4% to $1,930.33 per ounce, marking its biggest daily drop since mid-August. Simultaneously, U.S. gold futures fell by 0.6% to $1,955.80.
The strengthening of the dollar, prompted by China’s slower than expected services activity growth in August, made gold more expensive for other currency holders. Nevertheless, the drop in gold price was constrained by hopes that interest rate increases could be coming to an end.
Market analyst Carlo Alberto De Casa from Kinesis Money pointed out that “the expectation for a dovish Fed in September is capping the downside for gold.”
Recent data from the U.S. economy supports the belief in a soft landing as concerns about inflation and recession have subsided. Consequently, it solidifies the expectation that the Fed may not need to raise interest rates further.
Based on the CME FedWatch tool, traders see a 93% chance that the rates will remain unchanged at the upcoming Sept. 19-20 policy meeting. Moreover, there is about a 60% chance that rates will remain at their current levels for the rest of the year.
Gold, being a non-interest yielding asset, tends to lose appeal when interest rates increase. Investors are also keeping an eye out for comments by Fed officials scheduled to speak during the week.
Lukman Otunuga, senior research analyst at FXTM, noted that “gold seems to be searching for a fresh fundamental catalyst to trigger its next significant move.” He also added that weakness below the 50-day SMA could push the precious metal back towards $1,920.
Spot silver experienced a 2% decline to $23.49 per ounce, marking its largest daily drop in a month. Platinum and palladium also experienced decreases, with platinum dipping by 1.6% to $939.21 and palladium easing by 2.1% to $1,195.85.