Gold Price Falls 3% Amid Market Selloff
Gold prices tumbled over 3% on Friday amid a broader market sell-off sparked by fresh remarks from US Federal Reserve officials that dimmed hopes of another rate cut.
Spot gold fell to as low as $4,034.54 per ounce during the early morning trading, erasing most of its gains from the last few sessions after it looked like the metal was tracking towards its best weekly performance in a month.
By 9:45 a.m. ET, the spot price was down 2.6% at $4,034.54 per ounce. Gold futures saw a larger drop, with the most active three-month contracts falling 3.7% to $4,039.40 an ounce.
Driving this decline were hawkish signals given recently by Fed officials that diminished the likelihood of a December rate cut. Additional monetary easing, which the market had previously anticipated, would have bolstered the appeal of gold.
Market expectations for a 25 basis-point rate cut next month fell to 53%, from 64% earlier this week, CME Group’s FedWatch tool showed.
“It’s this idea that we’re going to see a lesser likelihood of a Fed rate cut in December that is taking some of the wind out of the sails of the gold and silver market,” David Meger, director of metals trading at High Ridge Futures, told Reuters.
Despite an end to the longest government shutdown in US history, investors and policymakers are flying blind ahead of next month’s policy meeting in the absence of official economic data, causing a market-wide selloff.
“When margin calls and liquidations happen, traders close everything to free up margin… This is what partially explains why even gold is down in this risk-off environment,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in a note.
Even with this pullback, gold is still up nearly 60% this year, with central banks stepping up their purchases for asset diversification and investors piling into the metal as a hedge against growing fiscal unease in some of the world’s biggest economies.
