Gold price falls below 5000 dollars as Fed rate cut expectations fade

Amid the ongoing conflict between the United States and Iran impacting the global economy, international gold prices are declining. Due to the easing expectations of Federal Reserve rate cuts, gold prices fell below $5,000 per ounce on the 16th. This is the lowest level since around a month ago, since the 20th of last month.

The main reason for this monetary policy shift is attributed to rising oil prices. The surge in oil prices has triggered inflation, which in turn reduces the likelihood of the Fed aggressively cutting rates compared to previous expectations. This has also negatively affected the gold market, leading to a price decline. Currently, the market widely predicts that the Federal Reserve is likely to keep interest rates unchanged at the upcoming Federal Open Market Committee (FOMC) meeting on the 17th and 18th, maintaining the current range of 3.50% to 3.75%.

Bob Haberkorn, senior market strategist at RJO Futures, stated that there is a large amount of idle capital not yet flowing into the market, which could lead to a rebound in gold prices. He expects gold could rise back to $6,000 per ounce, indicating strong investor interest remains.

On the other hand, according to observations from the Chicago Mercantile Exchange, not only is the likelihood of rates remaining unchanged at this meeting high, but the probability of rates staying steady until June this year has also increased significantly. Just a month ago, the chance of unchanged rates was only 31%, but now it has risen to 77%. This data reflects a major shift in market expectations regarding the Federal Reserve’s policy direction.

If this trend continues, the gold market could face negative impacts. However, the possibility of monetary policy easing again may also re-emerge. Therefore, gold prices are likely to fluctuate in the coming months, and investors should exercise caution in this uncertain environment.