This shift comes despite inflation showing signs of cooling in May.
As of 0340 GMT, spot gold had fallen by 0.4%, bringing its price down to $2,313.92 per ounce.
Similarly, US gold futures saw a more significant drop of 1.1% to $2,329.50 per ounce.
In India, MCX gold futures (August 5 contract) declined by ₹515 or 0.72%, trading at ₹71,455 per 10 grams.
“While the tamer consumer price index print was a net positive for gold, the takeaway from the Fed meeting was that the number of rate cuts in 2024 have been reduced and are still some distance down the road,” Tim Waterer, chief market analyst at KCM Trade was quoted as saying in a Reuters report.
He further noted that gold is likely to experience choppy trading in the short term until there is clearer guidance on the timing of the first rate cut from the Federal Reserve.
The Federal Reserve decided to maintain current interest rates on Wednesday and suggested that the onset of rate cuts might not occur until as late as December.
Policymakers cited the persistence of elevated inflation levels as a key reason for this cautious approach.
Back in December 2023, Fed officials had projected the beginning of a series of steady rate reductions over the next three years.
However, the inflation data released just hours before the Fed’s latest statement revealed that the consumer price index (CPI) showed no increase on a month-to-month basis in May.
This prompted some analysts to argue that the Fed’s latest projections might already be outdated, as per Reuters.
Adding to the downward pressure on gold, last week’s robust US employment data and reports that China’s central bank is halting gold purchases triggered the biggest daily drop in bullion prices since November 2020.
Despite these recent fluctuations, the long-term outlook for gold remains optimistic.
The precious metal’s rapid rise to successive record highs is expected to continue in the second half of 2024.
While reaching $3,000 per ounce might be slightly out of reach, the fundamental support for gold remains strong, according to traders and industry experts.
Neha Qureshi, Senior Technical and Derivative Research Analyst at Anand Rathi Commodities & Currencies, recommended selling gold August futures on a rise to ₹71,900 per 10 grams with a stop loss set at ₹72,500 per 10 grams and a target price of ₹71,000 per 10 grams.
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