On Tuesday, the price of gold dropped slightly. It fell to just below $2,050 for each ounce. This drop marked the end of a period where gold prices had been increasing for three consecutive days. The reason for this decrease is that the value of the US dollar started to rise. At the same time, the yields on US Treasury bonds also began to go up.
This shift in the market occurred because investors changed their views. They started to believe that the US Federal Reserve might not lower interest rates as soon as they had previously thought, specifically at the beginning of the year. However, the market still holds a belief. About 70% of market participants think that the central bank will reduce rates in March. But many experts view this expectation as overly optimistic.
Investors are now focusing on upcoming financial data. They are waiting for the US retail sales data, which will come out on Wednesday. They are also looking forward to hearing new statements from officials at the Federal Reserve this week. These pieces of information are important. They will help investors understand better what the Federal Reserve might decide regarding interest rates in the near future.
At the same time, an official from the European Central Bank gave a cautionary statement on Monday. This official suggested that it might be too early to consider lowering interest rates this year. The reason for this caution is the persistent problem of high inflation. There are also ongoing geopolitical risks that need consideration. This situation makes the decision to cut rates a complex one.