Thu Sep 19 08:07:00 UTC 2024: ## Gold Drops After Fed’s Hawkish Tone Despite Rate Cut
**New York, August 2nd, 2024** – Gold prices experienced a significant downturn on Wednesday, shedding 0.4%, following hawkish remarks by Federal Reserve Chair Jerome Powell despite a surprise 50-basis-point interest rate cut. The Fed’s move aimed to address easing inflation and a potential labor market slowdown.
While gold initially rose 1.2% on the rate cut, Powell’s subsequent comments dampened optimism. He emphasized that the Fed isn’t rushing to ease policy and that 0.5% cuts are not the “new pace,” suggesting further cuts are not guaranteed. He also indicated that the era of ultra-low interest rates is unlikely to return, with the neutral rate expected to be higher than before.
This hawkish tone fueled a strengthening US dollar, with the strongest gains against the Japanese yen. Gold, often seen as a safe haven asset, typically benefits from lower interest rates, but the Fed’s pronouncements countered this trend.
The euro also experienced volatility following the Fed’s decision. Despite the Fed’s rate cut, the eurozone economy is viewed as weaker than the US, leading some to believe the euro’s rally may be nearing its peak.
Meanwhile, the Japanese yen saw high volatility after the Fed’s announcement and Powell’s comments. The US dollar rose against the yen, with the pair nearing the 144.000 resistance level.
Today, traders will focus on US economic data, including Jobless Claims and Existing Home Sales. Strong data could further dampen gold’s appeal, while weaker-than-expected figures might provide a minor boost.
The Bank of England’s rate decision is also scheduled for today, potentially adding volatility to the euro.
Overall, gold prices remain sensitive to the Fed’s policy outlook. While the rate cut provided initial support, the hawkish comments from Powell have weighed on sentiment, suggesting that the gold market is likely to remain volatile in the near term.
First Piper 