Gold prices experienced a decline in Asian trade on Monday, driven by increasing expectations that the Federal Reserve will maintain higher interest rates for an extended period. Although profit-taking and near-term weakness in the dollar provided some support, the yellow metal faced headwinds from the prospect of prolonged elevated U.S. rates.
Spot gold fell 0.3% to $2,022.91 per ounce, while gold futures for February delivery dropped 0.2% to $2,024.30 per ounce. The recent unwinding of bets on an early rate cut by the Fed contributed to the decline in gold prices, bringing the metal close to the $2,000 per ounce level. However, gold found support at this level due to increased safe-haven demand amid escalating conflicts in the Middle East.
Despite some support from safe-haven buying and short-term dollar weakness, gold remained under pressure from expectations of the Fed maintaining higher interest rates for an extended period. The CME Fedwatch tool indicated a shift in market expectations, with traders now pricing in a higher likelihood of the Fed keeping rates steady in March, as opposed to initial expectations for a rate cut.
The gold market continues to navigate uncertainties related to the timing and scale of potential Fed rate cuts, with economic data releases and central bank communications influencing market sentiment.