Gold prices experienced a slight decline in Asian trade on Wednesday, influenced by hawkish-leaning comments from top Federal Reserve officials, which bolstered the dollar and Treasury yields. Despite this pressure on the yellow metal, gold prices remained close to recent peaks, driven by persistent concerns over escalating tensions between Iran and Israel, which continued to support safe-haven demand.
Spot gold steadied at $2,382.65 an ounce, while gold futures expiring in June fell 0.4% to $3,398.70 an ounce by 00:21 ET (04:21 GMT). Spot gold had surged to record highs above $2,400 an ounce last week.
Gold prices retreated from their record highs this week, influenced by robust U.S. inflation and retail sales data, leading traders to reduce their expectations of a Fed interest rate cut in June. Fed Chair Jerome Powell’s remarks on Tuesday further emphasized this sentiment, indicating that the central bank was hesitant to cut interest rates due to persistent inflation.
Powell’s comments contributed to a boost in the dollar and Treasury yields, with the greenback reaching over five-month highs. Traders are now pricing in a nearly 80% chance that the Fed will maintain steady rates in June, a significant shift from earlier expectations for a 25 basis point cut, according to the CME Fedwatch tool.
The prospect of prolonged higher interest rates is unfavorable for gold, as the yellow metal does not offer direct yield. This expectation may limit further gains in gold, especially considering that gold prices are already within overbought territory.
In addition to gold, other precious metals also experienced declines on Wednesday. Platinum futures fell 0.6% to $965.10 an ounce, while silver futures declined 0.5% to $28.223 an ounce.
Industrial metal prices remained relatively steady on Wednesday after recent rallies, as new sanctions on Russian metal exports suggested tighter markets. However, persistent strength in the dollar and the possibility of higher-for-longer interest rates contributed to some pullback in prices.
Despite these factors, positive economic data from China and ongoing geopolitical tensions continued to influence market sentiment.