Gold prices fell significantly during trading on Thursday, after traders assessed Federal Reserve officials' updated expectations for interest rates, which indicated only one cut in the US interest rate this year.
The U.S. Federal Reserve kept interest rates steady on Wednesday, while policymakers indicated they expect to cut rates only once in 2024.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
Powell's remarks
Federal Reserve Chairman Jerome Powell said the Fed's inflation forecasts are somewhat conservative and may not be supported by upcoming data, and are subject to revision.
Jerome Powell said that a rapid reduction in interest rates in the United States could have major repercussions on inflation.
In remarks following the Federal Reserve's decision to hold interest rates steady for a seventh straight time on Wednesday, Powell made clear that he expects rates to remain at 5.1% through the end of this year, with them falling to 4.1% over the next year.
Powell stressed the Federal Reserve's commitment to working towards price stability, while expecting inflationary pressures to continue in the US economy during the current and next two years.
He also noted that the US consumer price index could rise more than expected this year.
He added: We will continue to work to ensure that inflation returns to its target of 2%.
On the other hand, the Federal Reserve Chairman confirmed that the better-than-expected consumer price index data released yesterday was something that was welcomed by the bank's officials.
The headline consumer price index was flat on a monthly basis in May, missing expectations for a 0.1 percent increase. Core prices rose 0.2 percent, also below economists' expectations for a 0.3 percent increase.
According to data from the US Department of Labor, the US Consumer Price Index recorded an annual rate of 3.3% in May, a slowdown from 3.4% recorded in April, and contrary to expectations of its stability without change.
Gold's rapid rise to record highs shows signs of continuing into the second half of 2024, with the bullion's fundamentals still in place, although $3,000 an ounce looks out of reach, traders and industry experts said.
Gold at settlement yesterday
Gold futures extended gains on Wednesday after U.S. consumer prices unexpectedly slowed, boosting hopes for interest rate cuts this year.
At settlement, gold futures for August delivery rose 1.2%, or $28.2, to $2,354.8 an ounce.
Gold and dollar now
Spot gold fell 0.5 percent to $2,311.50 an ounce.
