Gold Edges Lower as Fed Officials Downplay Rate Cut Expectations – Gold prices experienced a slight decline on Tuesday after several Federal Reserve officials tempered expectations for an imminent dovish pivot by the central bank. This development helped stabilize recent losses in the dollar.

While the yellow metal remained above the $2,000 per ounce mark, it inched towards the low-$2,000s amid less dovish signals on U.S. monetary policy.

Spot gold dipped 0.1% to $2,024.67 per ounce, while gold futures expiring in February also fell 0.1%, reaching $2,038.20 per ounce by 00:35 ET (05:35 GMT).

Fed Officials Dampen Rate Cut Enthusiasm

Several Fed officials conveyed on Monday that market enthusiasm for immediate interest rate cuts was somewhat unwarranted. They emphasized that sticky inflation might keep monetary conditions tighter for a more extended period.

Chicago Fed President Austan Goolsbee expressed confusion over how markets reacted to the Fed’s meeting last week. Meanwhile, Cleveland Fed President Loretta Mester clarified that the Fed wasn’t considering rate cuts but rather evaluating how long policy needed to remain tight to return inflation to its 2% target.

These statements contradicted the dovish outlook presented by the Fed during its final policy meeting for the year, where the central bank indicated it was finished raising interest rates and would contemplate cuts in 2024.

Despite these comments, markets continued to price in rate cuts as soon as March 2024, triggering flows into rate-sensitive assets like gold. The yellow metal surged past the $2,000 per ounce level after the Fed meeting and has maintained this level since.

Market expectations for early rate cuts persisted, with Fed Fund futures prices indicating a nearly 63% chance of a 25 basis point rate cut in March 2024.

Gold is anticipated to benefit from a lower interest rate environment, as higher rates increase the opportunity cost of investing in the precious metal. This dynamic had constrained significant upside in gold over the past year.

Copper Rises on China Stimulus Anticipation

In the realm of industrial metals, copper prices ascended on Tuesday, propelled by expectations of additional monetary stimulus in China after a significant liquidity injection by the People’s Bank last week.

Copper futures expiring in March increased by 0.3% to $3.8595 per pound.

The red metal witnessed robust gains in recent sessions, tracking the weakness in the dollar. The People’s Bank of China injected over $100 billion worth of yuan liquidity into the economy to support growth, and it is now poised to maintain its benchmark loan prime rate at record lows later this week.

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