Market News
Gold price drops as Powell warns December interest rate cut 'far from' certain
Gold (GC=F)
Gold prices dropped on Thursday morning, with market sentiment weighing heavily on the precious metal despite an anticipated rate cut by the Federal Reserve as chair Jerome Powell indicated a December rate cut is "far from" a forgone conclusion.
Gold futures (GC=F) slipped 0.8% to $3,970.70 per ounce, while spot gold lost 1% to $3,966.22 an ounce, at the time of writing.
"A lot has gone against gold (GC=F) this week. The looming US-China trade deal diminishes trade and geopolitics as a tailwind," said Capital.com analyst Kyle Rodda.
"The hawkish cut from the Federal Reserve and the drop in the odds for another rate cut in December are also negative for gold (GC=F). I think gold could keep pulling back given this dynamic. Although, in the long run the trend is to the upside for gold."
On Wednesday, the US Federal Reserve cut interest rates by a quarter of a percentage point, marking the second reduction this year. This move lowered the benchmark overnight rate to a target range of 3.75%–4.00%.
Speaking at a press conference, Powell offered a note of caution about what lies ahead. "In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December," Powell said, adding, "a further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it, policy is not on a preset course."
Non-yielding gold (GC=F) thrives in low-interest-rate environments and during periods of economic uncertainty.
"Gold (GC=F) had a logical reaction to Powell trying to walk back expectations for a December cut. We're already seeing Fed funds futures trimming expectations, that would be dollar positive and gold negative," said Peter Grant, vice president and senior metals strategist at Zaner Metals.
