Gold prices struggled to gain traction on Wednesday amid uncertainty regarding the Federal Reserve's interest rate outlook.
Spot gold traded at $1,949.34 per ounce by 10:59 PM EST. Earlier in the day, spot gold recorded its largest daily decline in over a month at $1,947.89 per ounce. Gold futures fell by 0.8 percent to $1,957.80. As of writing, gold futures continued their downward trend, trading 0.2 per cent lower at $1,954.05.
Previously, bullion prices surged over seven percent in October, fueled by increased demand for safe-haven assets amid the Middle East conflict.
"The risk premium gold gained from the Israel-Hamas war is eroding. If you see an escalation in the conflict, then gold can get some momentum behind it," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
Gold's three consecutive days of decline drive the XAU/USD pair back towards the 200-day Simple Moving Average (SMA), currently around $1,935.
The recent momentum in the spot gold chart has broadened the technical boundaries of prices, with a lower low and a higher high. The immediate technical ceiling lies at $2,009, while any bearish continuation would require a breach of the $1,810 floor.
Meanwhile, palladium prices plunged to their lowest levels since 2018 at $1,007.73 earlier in the session before partially recovering to $1,049.06. Platinum tumbled 2.8 percent to $866.31, while silver dipped 0.5 percent to $22.52 per ounce.
Potential of further rate hikes
Gold prices are susceptible to rising U.S. interest rates, as they increase the opportunity income associated with holding the non-yielding asset.
Last week, Fed Chair Jerome Powell suggested that the central bank might not need to implement additional interest rate hikes to tame inflation. However, he left the door open for further rate increases if economic conditions warrant it.
Market observers anticipated a possible shift in Powell's stance as he delivered his speech on Wednesday at the U.S. central bank statistics conference. However, Powell refrained from addressing monetary policy, leaving investors to await his remarks at another conference scheduled for Thursday at 2 PM ET.
Several Fed officials, including Fed Governor Michelle Bowman, Minneapolis Fed President Neel Kashkari and Chicago Fed President Austan Goolsbee, have reiterated the need for further rate hikes to combat persistent inflation this week.
In a speech on Wednesday, Philadelphia Fed President Patrick Harker advocated for maintaining the current restrictive interest rate environment. According to Harker, the rates are likely to stay "higher for longer, as the other downward pressures on inflation work in tandem with the current policy rate to return our economy to balance."
U.K. sanctions Russian gold
In other parts of the world, the U.K. government imposed sanctions on Russian gold miners on Wednesday as a part of a broader package targeting Russia's gold and oil sectors.
Nord Gold and Highland Gold Mining are some that receive sanctions, alongside Krastsvetmet JSC — Russia's biggest precious metals refinery. These companies were sanctioned together with more than two dozen others.
The government also imposed sanctions on a UAE-based network that allegedly facilitated the transfer of $300 million in gold sales proceeds to Russia.
The U.K. has now imposed sanctions on over 1,800 individuals and companies, including 129 wealthy individuals with a combined net worth of £145 billion ($178 billion).
Among those targeted in the UAE — the new hub for Russian gold since Russia's invasion of Ukraine diverted trade routes — are gold trader Paloma Precious DMCC and Zimbabwean businessman Howard Jon Baker.