By Brijesh Patel, Sherin Elizabeth Varghese
(Reuters) -Gold slipped more than 2% to a one-month low on Wednesday after the U.S. Federal Reserve lowered interest rates as expected, but noted it will slow the pace at which borrowing costs fall any further, boosting the dollar and bond yields.
Spot gold was down 2.1% at $2,589.91 per ounce by 03:56 p.m. EST (2056 GMT), its lowest level since Nov. 18. U.S. gold futures settled 0.3% lower at $2,653.30.
“Markets are climbing a wall of worry into the close as (Fed Chief Jerome) Powell nods to a period of slower rate cuts predicated on further progress in inflation. Core PCE data later this week now takes on more importance,” said Tai Wong, an independent metals trader.
“Gold is slumping below $2,600, which will worry some nervous bulls,” Wong added.
U.S. central bankers issued fresh projections indicating two quarter-percentage-point rate cuts next year amid rising inflation, a forecast consistent with a wait-and-see approach as President-elect Donald Trump returns to the White House in January.
Powell said Fed policymakers want to see more progress on bringing inflation down as they consider future rate cuts.
Futures on the federal funds rate have priced in that the Fed will leave its benchmark overnight rate unchanged at the Jan. 28-29 policy meeting. Higher rates reduce the appeal of holding the non-yielding asset.
The dollar index jumped more than 1% to a two-year high, making gold more expensive for other currency holders, while the benchmark U.S. 10-year yield hit a fresh four-week high. [USD/] [US/]
Traders will be watching now for key U.S. GDP and inflation data due later this week that could further shape expectations around monetary policy.
“I do see the consolidation as a continuation pattern within the longer-term uptrend in gold. I think that trend will re-exert itself in the first quarter of 2025,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Elsewhere, spot silver fell 3.5% to $29.45 per ounce, platinum slipped 2% to $919.25, and palladium declined 3% to $906.88.
(Reporting by Brijesh Patel and Sherin Elizabeth Varghese in Bengaluru; Editing by Alexander Smith, Shreya Biswas and Paul Simao)
