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The price of gold continues to decline amid expectations of further tightening of the Fed's policy

Gold prices fell by almost 0.5% on Tuesday, reaching the lowest level since December 29. Meanwhile, since the beginning of the month, the price of gold has fallen by 5.8% (the largest decline since June 2021), offsetting the January increase (+5.66%).

Pressure on prices is exerted by expectations that the Federal Reserve will have to continue raising rates in order to slow down the economy and curb inflation. Friday's report, which pointed to an acceleration in the core personal consumption expenditures price index (PCE), the Fed's preferred inflation indicator, to 4.7% YoY in January from 4.6% YoY in December, as well as stronger-than-expected growth in Americans' personal spending in January, reinforced concerns that inflation It will be much more stable than previously feared by the markets, which, in turn, will encourage the Fed to continue tightening policy, as well as force it to keep interest rates at a higher level for longer than previously expected. Fed Governor Philip Jefferson said on Monday that he was under "no illusion" that inflation would return quickly to the U.S. central bank's target.

According to the CME FedWatch Tool, markets now expect the federal funds rate to peak at 5.4%, which implies at least three additional increases of 25 basis points compared to current levels. In addition, the probability of a 50 basis point rate hike at the Fed's March meeting is now estimated at 24.7%, compared with 18.1% a week ago.

The decline in gold prices was also associated with the strengthening of the US currency. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.10% to 104.79.

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