Gold Slips Ahead of Federal Reserve Meeting | Is it Time to Buy the Dip?

Gold Slips Ahead of Federal Reserve Meeting

The last two weeks have been a windfall for gold bulls. Investors pushed the metal to a new all time high; gold ended March 11th trading at $2,177.55 per troy ounce. A combination of speculation surrounding interest rate reductions and concerns about geopolitical conflicts in Gaza and Ukraine sent gold spiraling upward to new heights. 

This week doesn’t seem quite as promising for gold stackers hoping for a sustained bull market. At around midnight of March 18th, gold’s spot price dropped to $2,147.86. The metal recovered throughout the day and remains relatively steady at just over $2,160/oz. The second half of March may not mirror the optimistic gold bull market investors have enjoyed over the past fortnight. 

Why have gold prices fallen? Evidence points to a healthy skepticism among gold investors ahead of the next Federal Reserve meeting, which is scheduled for March 19-20. Fed Chair Jerome Powell has emphasized that lower interest rates could be in the cards for 2024, provided that economic signals continue to remain positive. Powell’s comments have been behind much of the metal’s price-action this quarter, as lower interest rates are associated with increased gold prices.

Are Low Interest Rates Coming Next Fed Reserve Meeting? 

Gold prices are likely falling ahead of the upcoming Federal Reserve meeting. In a sense, investors are hedging their bets and pulling out of gold before another month of unchanged rates further slash gold prices. AP News reports that the Fed is likely to “preach patience” as they push their promised interest rates cuts deeper into 2024. 

Federal Reserve is likely to preach patience as consumers and markets look ahead to rate cuts https://t.co/7vOAXbY90P

— The Associated Press (@AP) March 18, 2024

Investors won’t know for sure whether interest rates are moving up, down, or sideways until the Fed releases their meeting minutes. Minutes for Federal Reserve meetings are generally released three weeks after the meeting concludes, so investors still have some time to react and speculate ahead of the official news. 

It’s worth noting that nearly every major financial expert believes interest rates will remain unchanged following the Fed’s March meeting. CME Group projects a 100% chance of no change in the Fed’s current target interest rate. The implication of unchanging interest rates seems to be behind the metal’s drop in price following a record-breaking early March. 

Gold Price Projections – March 2024

Investors should expect volatility in the gold market as speculation escalates ahead the release of Federal Reserve minutes from their March meeting. Experts believe the Fed will remain cautious on the issue of lower interest rates. Powell promised rate cuts sometime in 2024, but told reporters that the Federal Reserve needs to see more sustained evidence of economic recovery before they’d be willing to pull that lever. 

For now, it appears that the Fed doesn’t quite have the confidence they need to go all-in on lower interest rates. 

One point of uncertainty is the exact nature of the data America’s Federal Reserve will be deliberating this week. If key economic indicators are especially troubling, it’s likely the organization will push interest rate cuts even further into 2024. 

Projections from CME Group suggest that a longer wait for interest rate reductions is a genuine possibility. Last week, market-maker predicted a 71.8% chance that rates would be cut during the Fed’s June meeting. That percentage has decreased to a 55.2% probability of rate easing during that same meeting. 

Still, speculation will be the name of the game for gold investors in the next few weeks. In the lead-up to Fed minutes being released, expect a wild ride for gold prices as institutional and retail investors alike scramble to interpret news and comments from Powell and the rest of the Federal Reserve. 

Is Now a Good Time to Buy the Dip on Gold? 

Some investors are taking Monday’s brief reprise from a bullish early March as an opportunity to buy the dip on gold. Gold stackers who anticipate promising news from the Fed next month may want to purchase more gold coins and bars before prices shoot up again. While the available evidence suggests that rate cuts aren’t coming next meeting, gold bulls will return with a vengeance if Powell suggests that the economic data remains promising. 

2024 is shaping up to be a big year for gold. Rabid speculation concerning Federal Reserve interest rate cuts adds fuel to a fire started by geopolitical tensions and economic insecurity. Could 2024 be the year that gold shocks the investment world? 

For now, it’s clear that gold’s recent price dip has much to do with the likelihood that the Fed will hold firm on interest rates during their meeting this week.