Gold hits 2-week high on hopes of smaller U.S. rate hikes

Gold prices climbed a two-week high in early Asian trade on Thursday, after U.S. Federal Reserve Chair Jerome Powell‘s speech reinforced expectations of smaller interest rate hikes ahead.

FUNDAMENTALS

* Spot gold was up 0.4% to $1,775.77 per ounce, as of 0039 GMT, having hit its highest level since Nov. 16.

* U.S. gold futures rose 1.7% to $1,788.90.

* Powell said on Wednesday it was time to slow the pace of coming interest rate hikes while also signalling a protracted economic adjustment to a world where borrowing costs will remain high, inflation comes down slowly, and the U.S. remains chronically short of workers.

* Market participants now expect a 91% chance of a 50 basis points rate hike in the U.S. central bank’s upcoming December meeting.

* Lower interest rates tend to boost bullion’s appeal as the it reduces the opportunity cost of holding the non-yielding asset, which ended November more than 8% higher – its biggest monthly gain since July 2020.

* Meanwhile, U.S. private payrolls increased far less than expected in November, suggesting demand for labour was cooling amid high interest rates, a survey showed on Wednesday.

* Investors’ attention now turns to the U.S. Labor Department‘s non-farm payrolls data on Friday, which could influence Fed’s policy decisions.

* Spot silver gained 0.3% to $22.26, platinum rose 0.6% to $1,038.46 and palladium rose 0.6% to $1,892.35.