The Federal Reserve continues to pressure gold, and prices fall despite geopolitical concerns

Gold prices fell during today’s trading session, as hopes for early US interest rate cuts have faded following comments from Federal Reserve officials. This has dampened the metal’s appeal as a safe haven.

Geopolitical concerns remain high, however, which is keeping safe-haven buying on the agenda and limiting the downside for gold. On the other hand, the lack of clarity on the timing of potential rate cuts is reducing the chances of gold rising.

Fed Governor Lael Brainard said that it might be appropriate to cut rates if inflation and labor markets continue to slow, but if progress in fighting inflation stalls, the Fed may need to hold policy at its current level for longer.

Richmond Fed President Thomas Barkin said that it makes sense to be patient about cutting rates given the increased uncertainty, noting that his outlook eight weeks ago had been “clouded” by some data.

Fed officials want to hold off on cutting rates until they are more confident that inflation is headed down to 2%.

Higher interest rates increase the opportunity cost of holding bullion.

Investors are awaiting US weekly jobless claims data due at 16:30 Saudi time after last week’s monthly non-farm payrolls report came in stronger than expected, showing signs of continued strength in the labor market.

Oil rises amid anticipation of more talks on Gaza

Oil prices rose on Thursday after Israel rejected a proposal from Hamas for a ceasefire, while talks continue to try to end the conflict in Gaza and the tensions in the Middle East in general that have been casting a shadow over the market since October.

Indications of strong US fuel demand also supported the upward trend in the market this week.

Israeli Prime Minister Benjamin Netanyahu rejected Hamas’ latest proposal for a ceasefire and the release of hostages held in the Gaza Strip, but US Secretary of State Antony Blinken said there was still room for negotiation to reach an agreement.

In terms of demand, data released on Wednesday showed a larger-than-expected decline in US gasoline stocks, which continued to support the market.

The US Energy Information Administration reported that gasoline stocks fell by 3.15 million barrels last week, against analysts’ expectations for an increase of 140,000 barrels.

Brent crude futures rose 22 cents, or 0.28%, to $79.43 a barrel, and US West Texas Intermediate (WTI) crude futures rose 19 cents, or 0.26%, to $74.05 a barrel.

The specter of the US banking crisis returns amid the collapse of many banks’ stocks

The stocks of many regional banks in the United States have been hit hard in recent days, raising fears of another banking crisis. In addition, concerns were raised after the decline in the shares of New York Community Bancorp (NYSE: NYCB).

New York Community’s stock fell after reporting unexpected losses on commercial real estate loans, bringing its losses to 60% so far this year.

This has renewed concerns about medium-sized regional banks exposed to commercial real estate. In addition, Moody’s downgraded New York Community’s credit rating to non-investment grade or “junk” on February 6.

Moody’s noted that the bank faces financial challenges, along with risk management and governance challenges, adding that it could downgrade the bank further if conditions deteriorate.

Furthermore, New York Community Bank is not the only one that has declined sharply; at least nine other regional banks have suffered heavy losses since the beginning of 2024. Valley National Bancorp (NASDAQ: VLY) shares have fallen 25%, Metropolitan Bank Holding (NYSE:MCB) has lost about 15%, Harbor One Bancorp Inc (NASDAQ:HONE) is down 14%, and Comerica Inc (NYSE:CMA) has fallen 13% so far this year.

Other regional banks whose share prices have fallen include Zions Bancorporation (NASDAQ: ZION) by 12%, Western Alliance Bancorp

Gold and the dollar now

Gold futures are now down 0.23% to $2047 an ounce.

Spot gold fell about 0.15% to $2032 an ounce.

The dollar index is up 0.04% to 103.960.

Other metals

Palladium was flat in spot trading at $894.62 an ounce, near its lowest level in five years.

Silver rose 0.7% in spot trading to $22.35 an ounce and platinum was flat at $879.81.

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Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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