Gold Prices Hold Above $2,100 Level as Hopes for U.S. Rates Easing Mount
Gold prices remained above the $2,100 level on Wednesday, close to a record peak hit in the previous session, as investors await remarks on the economy’s health from Federal Reserve Chair Jerome Powell. The precious metal lost about 3% after President-elect Donald Trump picked Scott Bessent as his Treasury secretary, and reports of a ceasefire deal between Israel and Hezbollah eroding its appeal.
Spot prices of gold dropped 3.44% to $2,616.80 per ounce, while gold futures on the New York Mercantile exchange traded at $2,628.5. MKS Pamp’s head of metals strategy, Nicky Shiels, attributed the decline to a potential Israel-Hezbollah ceasefire agreement and Bessent’s appointment, which contributed to a risk-on sentiment.
Traders are awaiting Powell’s remarks on the economy’s health, as hopes for U.S. rates easing by mid-year mount. The probability of a rate cut in December has declined, with the CME Group’s FedWatch gauge showing a 56% probability, down from 75% about a month ago.
A stronger dollar also diminished gold’s appeal, making it more expensive for holders of other currencies. The greenback strengthened after Trump announced a proposal for 25% import tariffs on Canada and Mexico, and plans to raise tariffs by an additional 10% on all Chinese goods coming into the U.S.
Gold buying activity is expected to remain constrained due to a vastly different outlook for the Fed, which no longer features the risk of an “overly easy” Fed policy. Higher interest rates tend to erode the appeal of non-interest bearing gold compared to Treasuries.
Gold prices fell to a two-month low after Trump’s victory before rebounding to the $2,700 levels. The precious metal is expected to continue to be volatile over the next four months as the Trump administration transitions to power and major announcements regarding tariffs and the Russian-Ukraine war come into greater focus.
Despite the short-term decline, gold prices are still set to advance toward $3,000 in 2025, according to Robert Eckford, CEO of Rua Gold.