Gold prices drop as traders anticipate smaller Fed rate cut

On Wednesday, gold prices fell to their lowest level in nearly two weeks, marking a continued decline for the fourth consecutive session. Spot gold decreased by 0.02% to $2,493.33 per ounce, while U.S. gold futures dropped 0.06% to $2,524.40. This decline is largely attributed to market expectations surrounding the U.S. Federal Reserve's upcoming policy meeting, with traders anticipating a modest 25 basis point rate cut rather than a more aggressive 50 basis point reduction. Market analysts, including Peter A. Grant from Zaner Metals, noted that the sentiment shift has diminished the prospects for a larger rate cut, leading to increased pressure on gold prices. The CME FedWatch tool indicates a 59% probability of a 25-basis-point cut, which has influenced traders' strategies. Additionally, the release of key U.S. economic data, such as employment reports, is expected to provide further insights into the Fed's decision-making process. The decline in gold prices is also linked to broader market trends, particularly the weakness in equities, which has prompted traders to cover margin calls. Global shares fell, driven by a significant sell-off in tech stocks, particularly U.S. chipmaker Nvidia, amid concerns over slowing global growth. This environment has created a challenging backdrop for precious metals, despite some analysts maintaining a bullish outlook for the long term. Despite the recent losses, market analysts like Mike Ingram from Kinesis Money suggest that the overall trend for precious metals remains upward, with key resistance levels identified at $2,510 and $2,513 per ounce. The initial breakout target for gold is set at $2,543, indicating potential for recovery in the near future.