Investing.com– Gold prices saw a slight decline on Monday, continuing their downtrend following significant losses from the previous week due to the Federal Reserve’s aggressive stance.
As of 08:40 ET (13:40 GMT), gold was down 0.1% at $2,618.31 per ounce, while February futures dropped 0.5% to $2,632.09 per ounce.
The precious metal lost 1% last week after Fed officials indicated fewer interest rate cuts might occur in 2025 amidst persistent inflation. This shift towards a hawkish policy has strengthened the US dollar, contributing to the downward pressure on gold prices.
Gold prices under pressure post-Fed meeting, markets analyze PCE data
Gold hit a one-month low on Wednesday as market expectations for Fed rate cuts in 2025 diminished.
Current projections suggest the first rate cut in 2025 might happen in June, with expectations for approximately two cuts over the year, according to market analyses.
Increased interest rates exert downward pressure on gold since the opportunity cost of holding the metal rises, making it less appealing compared to interest-yielding assets like bonds.
Recent US data indicated that the Fed’s preferred inflation measure—the PCE index—increased by 0.1% in November, a slowdown from October’s 0.2% rise. This brought the annual PCE inflation rate to 2.4%, slightly below forecasts of 2.5%.
Meanwhile, core PCE, which excludes volatile food and energy prices, remained at 2.8% year-over-year, significantly higher than the central bank’s 2% target.
Other precious metals saw gains on Monday, with silver rising 0.9% to $944.60 per ounce, and platinum increasing 0.9% to $30.218 per ounce.
Dollar remains near two-year peak
The Fed’s hawkish shift has fortified the US dollar, as higher interest rates enhance the appeal of dollar-denominated assets.
The dollar index climbed 0.6% on Monday, approaching a two-year high reached on Friday.
A stronger dollar generally places downward pressure on gold prices, as it becomes more expensive for buyers using other currencies.
Copper appreciates amid soft US inflation; markets look towards China stimulus
In the realm of industrial metals, copper prices rose slightly on Monday, recovering from over a 1% decline last week, driven by the positive sentiment following softer inflation data in the US.
The red metal has faced challenges from a strong dollar following the Fed meeting.
Additionally, markets are anticipating details of new stimulus efforts in China, as recent reports suggest that Beijing plans to increase fiscal stimulus in the upcoming year, given that China is the world’s largest copper importer.
On the London Metal Exchange, benchmark copper prices increased by 0.1% to $8,960.50 per ton, while one-month copper climbed 0.6% to $4.1063 per pound.
(Peter Nurse contributed to this article.)
