Gold’s recent dip has continued into this week, with the metal testing the $2,300 per ounce level.

Wednesday saw the latest FOMC meeting from the US Federal Reserve. As expected, the Fed struck a hawkish note, leaving US rates unchanged and warning that further progress would be needed on inflation before any cuts could be considered. US inflation is proving persistent in the last leg to get back to the Fed’s 2% target.

Rate cut expectations have been pushed back to November now, and there are even some parts of the market that believe another hike could be on the cards given recent inflation figures have been higher than expected. Although the meeting had a hawkish tilt, it was largely within market expectations, and saw little reaction from currency and metal markets.

020524 USD Chart

Last week’s range of $2340-50 has slipped, with gold falling as low as $2,282.27 across Tuesday’s close and into Wednesday. Gold has managed to bounce back however and push back above $2,300.

As discussed last week, gold is up against a number of headwinds at the moment. High interest rates and bond yields are making the metal less attractive, while profit-taking is continuing following the huge rise in price since the start of March. The Shanghai Gold Exchange is closed this week for the Labour Day holiday in China, further limiting the buying potential of this key territory.

Central bank buying however is continuing to support the metal. The World Gold Council have reported that Q1 2024 buying was a record for the period, while coin and bar demand have also risen 3% year-on-year.

The key for gold now will be whether it can hold on to recent gains. It is expected that gold will rise when rates are cut. If this happens with gold still at $2,300 per ounce, then new records above $2,500 are easily achievable, but if gold pulls back to the $2,000 threshold from the start of the year, then it will have a harder task to set new records. With demand helping to support the metal however, dips along the way are so far being seen as buying opportunities, and should keep gold from falling too far over the summer.