Gold price falls below $2,000 as market readjusts rate hike expectations

Spot gold was down 0.7% to $1,991.16 per ounce by 12:05 p.m. EDT, having fallen as much as 1.8% to a two-week low of $1,969.09 earlier. US gold futures also fell 0.7%, trading at $2,003.90 an ounce.

“Once gold breached that $2,000 mark, there were a lot of stop losses that were triggered,” Phillip Streible, chief market strategist at Blue Line Futures in Chicago, explained to Reuters.

“Anytime you get earnings, you get a lot of people chasing individual stocks and that could also cause them to not invest so much in metal,” he added.

Meanwhile the US dollar strengthened, underpinned by yields climbing to a near one-month peak. Markets are now pricing in an 85% chance of a 25-basis-points rate hike at the Federal Reserve’s May 2-3 meeting, according to CME’s FedWatch tool.

St. Louis Fed chief James Bullard said on Tuesday that the Fed should continue raising interest rates as recent data show inflation remains persistent while the broader economy seems poised to continue growing, even if slowly.

The correction was due to the markets readjusting their expectations of the Fed’s rate-hike path, but gold’s rally has only been delayed, said Ole Hansen, head of commodity strategy at Saxo Bank.