Gold Prices Sink as Rate Cut Hopes Crash

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GoldGold prices fell on Tuesday morning as traders remained concerned that the U.S. Federal Reserve would not cut interest rates this month as originally expected. Falling expectations for the interest rate cut have already sent markets into a tailspin, with Asian markets falling on Monday and continuing their downward trend into Tuesday morning; gold prices are just one more casualty in the ongoing interest rate drama.

Gold futures were down 0.36 percent to $1,395.00 as of 10:08 a.m. HK/SIN. There was no economic data released on Monday, though according to new reports published by Sharps Pixley of London, new data shows that there was a decline in Chinese gold demand in the first half of 2019, which is hardly surprising given the tariffs that U.S. President Donald Trump has placed on China. China has been considered the world’s largest consumer of gold for nearly seven years, so its reduced demand paints a troubling picture for the gold market. That being said, analysts are quick to point out that by looking at the Shanghai Gold Exchange one will notice that the downward withdrawal trend has been in progress for three years. On the other hand, 2015 saw record gold withdrawals, so it’s possible that after hitting peaks, there was nowhere to go but down. Still, while Chinese gold demand may be faltering, global demand has remained at high levels, with notable demand coming from India, Europe and the Middle East, which may support gold prices in the second half of 2019.

Dollar Firms on Rate Expectations

The reduced expectations for an interest rate cut didn’t just direct gold prices and stock indexes, it also bolstered the U.S. dollar, which remained near the three-week highs hit on Friday. The greenback was trading up 0.09 percent against the yen on Tuesday morning, to 108.82. IT was up modestly against the yen to $1.1213, though it eased lightly against the British pound to trade at $1.2513. The sterling remained near six-month lows against the dollar following renewed speculation that the Bank of England will commence a monetary easing policy as part of its plan to exit the European Union.

All eyes are now on Federal Reserve Chairman Jerome Powell whose semi-annual testimony in front of Congress will begin on Wednesday and is expected to give hints as to whether the Fed will cut interest rates or pause its plans following the strong jobs data from Friday.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.