Gold prices brace for biggest weekly drop this year

Gold prices hit a two-week low as interest rate expectations began to fall following the tightening stance in the Federal Reserve’s (Fed) meeting minutes.

While the price of an ounce of gold in the spot market has fallen 5% since the start of the week, the precious metal is bracing for its biggest weekly drop in about eight months.

Gold, on the other hand, is still up 13% this year, helped by central bank buying, strong demand in Asia and conflicts in Ukraine and the Middle East.

However, expectations for the Fed’s first rate cut were pushed back to the final quarter of the year after U.S. data this week pointed to a recovery in economic activity.

Gold prices posted their biggest weekly drop this year as the data reinforced expectations that the Federal Reserve will keep interest rates high.

Data flow reaches gold level

While continuing to send strong signals, macroeconomic indicators released by the United States also support the guidance of Federal Reserve officials, who said they hope to see more evidence that inflation is cooling and should not rush to cut interest rates.

Data released yesterday showed that the number of first-time applications for unemployment benefits in the United States was 215,000 in the week ending May 18, lower than expected.

Analysts said the outflow of positive data about economic vitality increased the likelihood that the Federal Reserve would keep its policy rate high for longer, while the decline in unemployment claims suggested the labor market continued to remain strong even as U.S. job growth slowed.

With those developments, analysts said money market pricing has dropped to 48% for the Fed’s first rate cut in September, with a 65% chance of cuts starting in November and December. The odds for December are 85%.

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The current price of gold is $2,000,338 per ounce.

Yesterday, gold grams also fell along with the ounce price, closing the day at 2,00410 liras, a drop of 2.1%. After starting the new day with gains, the gram of gold traded at 2,000 423 liras. As of the same minute, the quarter of gold was sold for 4,000 15 liras, and the Republic gold was sold for 15,00995 liras.

Daniel Ghali, commodity strategist at TD Securities, said a stronger dollar and diminishing prospects for U.S. rate cuts led to some selling in gold, but the downside impact was limited.

“Investors who were concerned about the Fed’s outlook didn’t really stay in gold that long. They missed the rally, so there wasn’t a lot of gold to sell. So while we think gold will correct, it will be a relatively shallow correction,” Ghaly said.

UBS Group analysts Wayne Gordon and Giovanni Staunovo raised their year-end gold forecast by 4% to $2,600 an ounce, calling the price drop “relatively short-lived.”