Gold backs off record highs on profit-taking

Gold prices fell in European trade on Friday on track for the second loss in a row off record highs at $2200 on profit-taking. 

The precious metal is pressured by a surge in dollar against major rivals, making greenback-denominated gold futures costlier to holders of other currencies. 

The precious metal is still on track for a weekly profit after the Federal Reserve maintained its forecasts for interest rate cuts this year, underpinning gold.

Gold Prices Today  

Gold prices fell 0.85% to $2162 an ounce, with a session-high at $2186, after losing 0.25% on Thursday away from a record high of $2222. 

The Dollar

The dollar index rose 0.4% on Friday, extending gains for the second straight session and hitting a five-week high at 104.42 against a basket of major rivals. 

The gains come amid optimism about the economic performance in the US, and the likelihood that other global central banks will rush into rate cuts before the Federal Reserve. 

Weekly Trades

Gold prices are up 0.5% so far this week on track for the first weekly profit in five weeks following the Fed’s policy meeting. 

The Fed 

As expected, the Federal Reserve maintained interest rates unchanged at 5.5%, a 2002 high, for the fifth meeting in a row. 

The Fed said that recent indices showed that US economic performance is still strong, with high employment gains and weakening inflation, although it remains high. 

The Fed said that any changes for interest rates will require careful examination of inflation data and upcoming risks. 

It asserted it won’t cut interest rates until further confidence is gained about reaching the 2% inflation target.

Economic Outlook

The Fed’s quarterly economic outlook report included important revisions:

For growth, the Fed changed its outlook for 2024 growth from 1.4% to 2.1%, and for 2025 growth from 2.0% to 1.8%, and for 2026 growth from 2.0% to 1.8%. 

For main inflation, the Fed maintained its 2024 inflation forecast at 2.4%, and the 2025 forecast at 2.2%, and the 2026 forecast at 2.0%.

As for core inflation, the Fed changed its 2024 forecast from 2.4% to 2.6%, and the 2025 forecast is still at 2.2%, and the 2026 forecast is still at 2.0%. 

Finally, the Fed maintained its interest rate targets this year at 4.75%, and at 4.0% next year. 

Powell

Fed Chair Jerome Powell said the FOMC members are committed to bringing inflation to the 2% target, noting that inflation while slowing is still above the target. 

He added that US inflation remains high and the Fed is paying attention to it, and that higher inflation than expected in February didn’t change the Fed’s outlook. 

US Rates

Following the Fed’s meeting, the odds of a 0.25% interest rate cut in June surged to 75%. 

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at a total of 838.5 tonnes, the highest since February 14.