World gold prices fall sharply as Fed tightens interest rate cut expectations

World gold price drops more than 100 USD as Fed tightens interest rate cut expectations

Gold prices fell sharply after a series of tough statements from Fed officials, weakening expectations of a December interest rate cut. Spot gold fell nearly 3% to $4,093.57 an ounce. Despite the sharp decline, gold prices still rose 2.3% for the week. December gold futures fell 3.6% to $4,043.10 an ounce.

The possibility of a Fed rate cut has been a factor in gold losing momentum, according to David Meger of High Ridge Futures. The US stock market has corrected deeply as expectations of policy easing gradually cooled.

The longest U.S. government shutdown in history has just ended, leaving the Fed short of key data for its upcoming meeting. Many investors hope weak economic data will support gold prices, but Fed officials continue to signal caution. The probability of a 25 basis point rate cut in December is only 53%, down from 64% previously.

Gold prices usually benefit in a risky market environment. However, margin calls have caused many investors to sell gold to free up capital, contributing to a sharp decline in gold prices.

Physical demand for gold in Asian markets was weak this week. Silver fell 3.7% to $50.38 an ounce but was still up 4.6% for the week. Platinum fell 3.6% to $1,524.05 and palladium fell 3.3% to $1,379.18 an ounce.

SJC gold price sets record difference with world gold price

The gap between the SJC gold price and the converted world gold price is up to 23.5 million VND/tael, the largest difference ever recorded. The reason is that the world gold price dropped sharply in the evening when the Vietnamese market had closed, causing the domestic gold price to not have time to adjust accordingly.

If world gold prices continue to fall in the next session, domestic gold prices are likely to fall sharply tomorrow.

Gold prices continued to be affected as the market was divided on the possibility of a rate cut. Minneapolis Fed President Neel Kashkari said he was undecided about next month's meeting, while Cleveland Fed President Beth Hammack said rates should remain unchanged. Higher interest rates make gold less attractive, so this stance pushed prices lower.

Markets also await speeches from three Fed officials on Friday, along with a schedule of economic data releases delayed during the government shutdown.

Some experts believe that this week’s gold price volatility may have been amplified by a “gamma squeeze” – a pattern where dealers buy gold contracts to hedge their exposure after selling cheap options. The reduced market liquidity makes gold more volatile.

Despite falling from a peak of more than $4,380 an ounce, gold prices are still up about 55% this year, heading for their best performance since 1979. Central banks in many countries are aggressively buying gold, helping the long-term trend of gold prices remain positive.