KEY POINTS:
- Gold prices remain subdued.
- Bullion hovers below $2,400.
- Markets estimate a 65% likelihood of a rate cut.
Bullion has dipped nearly 4% from its August zenith of $2,475 per ounce as traders adapt to the shifting economic panorama.
Gold (XAU/USD) predominantly missed the universal relief rally on Tuesday, following a dismal start to the week for global markets. The precious metal not only faltered on Tuesday but continued its descent, marking the fourth consecutive day of negative performance. Traders exchanged the yellow metal for values below $2,400, signifying enduring weakness exacerbated by a fortified US dollar. The US dollar surged on Tuesday and maintained its strength into Wednesday morning, suppressing bullion prices, which become more costly on international markets due to their dollar pricing. In this context, gold prices have retraced nearly 4% from their August apex of $2,475 per ounce. However, analysts note that tensions in the Middle East and potential interest rate cuts might restore gold’s luster. Markets are factoring in a 65% probability of the Federal Reserve reducing interest rates by 50 basis points in September, an increase from the previous 25-basis-point cut expectation prior to the latest employment data indicating a weakening economy. Lower interest rates generally enhance gold’s appeal due to its non-yielding nature, in contrast to the US dollar, which offers higher returns in a high-rate environment.