Gold prices continued to decline on September 18, following a strengthening of the dollar after the US Federal Reserve lowered interest rates by an anticipated 0.25 percentage points and presented a cautious stance on future monetary policy adjustments.
The price of spot gold fell by 0.6 percent, reaching $3,637.41 per ounce as of 0636 GMT, after peaking at a record $3,707.40 on Wednesday.
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Gold futures for December delivery in the US decreased by 1.2 percent, settling at $3,671.30.
“The Fed’s message leaned slightly hawkish regarding interest rates; they did not fully support the idea of lower rates,” noted Edward Meir, an analyst at Marex.
“Consequently, we witnessed the dollar gaining strength after the Fed’s meeting, accompanied by a rise in Treasury rates… I believe we might be experiencing a short-term overextension in prices and could see a pullback towards the $3,600 level.”
The dollar increased by 0.4 percent, enhancing its value against other currencies, which in turn makes gold more expensive for holders of foreign currencies.
The Federal Reserve’s rate cut on Wednesday was characterized by Chair Jerome Powell as a precautionary measure responding to a weakening labor market, with the central bank adopting a cautious, meeting-by-meeting approach regarding future interest rates.
Market participants are currently estimating a 90 percent likelihood of an additional 25-basis point reduction during the Fed’s upcoming meeting in October, an increase from the 74.3 percent probability observed the previous day, according to the CME Group’s FedWatch tool.
The Bank of England is set to announce its monetary policy decision later on Thursday, with expectations leaning towards maintaining rates at 4 percent.
In addition, SPDR Gold Trust GLD, the largest gold-backed exchange-traded fund globally, reported a decrease in holdings of 0.44 percent, dropping to 975.66 tonnes on Wednesday from 979.95 tonnes on Tuesday.