Amid speculation about the upcoming U.S. Federal Reserve meeting, gold prices fell to their lowest level in four weeks.
At 0436 GMT, spot gold was posting a slight decline of 0.1% to settle at $2,284.44 an ounce, its lowest level since April 5, Reuters reports.
On Wednesday, May 1, gold prices fell to their lowest level in nearly four weeks as investors anxiously awaited the U.S. Federal Reserve’s monetary policy announcement.
At 0436 GMT, spot gold was trading 0.1% lower at $2,284.44 per ounce, its lowest level since April 5, according to Reuters.
After falling 2% on Tuesday, driven by a rise in the dollar and Treasury yields, there was this pullback.
Since its high of $2,431.29 on April 12, the precious metal has lost more than $140.
Meanwhile, U.S. gold futures were trading 0.4% lower at $2,293.10 an ounce.
In the domestic market, the price of 10 grams of gold hovered around 72,000 yen on May 1.
Pure 24-karat gold was trading at 72,590 ₹ per 10 grams, while 22-karat gold hovered around 66,540 ₹ per 10 grams.
Analyst Edward Meir of Marex, quoted by Reuters, said, “There is no improvement in inflation rates so far in 2024. The Fed could reverse course and adopt a more hawkish stance, which is currently discounted in gold prices.”
Attention now turns to the U.S. central bank’s assessment of policy, followed by comments from Chairman Jerome Powell.
The Fed is widely expected to keep its benchmark interest rate between 5.25% and 5.5%.
Meir warned, “If Powell adopts a hawkish tone, we could see another $30 to $40 price drop from today to tomorrow.”
Gold, often seen as a hedge against inflation, is being challenged by higher interest rates, making it less attractive as a non-yielding asset.
The likelihood that interest rates will remain high poses a problem for gold, as it increases the opportunity cost of investing in the metal.
The anticipation of an interest rate cut has caused gold prices to fall in the last two weeks from their recent high.
Experts advise investors to consider gold for their portfolios, as it can help spread risk.
Gold is generally used as a buffer against economic instability and inflation due to its low correlation with other asset classes such as stocks and bonds.
For those who wish to diversify their investments and reduce the overall risk of their portfolio, it may be advantageous to allocate part of their portfolio to gold.