Gold holds above $2,000 on Fed rate cut hopes; focus on US inflation

Gold prices held steady above the key $2,000 level on Wednesday, supported by prospects of interest rate cuts from the Federal Reserve next year, with investors awaiting for U.S. inflation numbers later this week.

FUNDAMENTALS

Spot gold was little changed at $2,038.49 per ounce, as of 0106 GMT. U.S. gold futures were unchanged at $2,051.60.

Last week, the Fed indicated its tightening phase was at an end and signaled that rate cuts are in the cards for 2024.

Atlanta Fed President Raphael Bostic on Tuesday said there is no current “urgency” for the Fed to reduce U.S. interest rates given the strength of the economy.

Markets are pricing in about a 75% chance of a Fed rate cut in March, according to CME FedWatch tool.

Lower interest rates decrease the opportunity cost of holding nonyielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.
The dollar was flat at 102.180, but was hovering near its lowest level in four months touched last week, while benchmark U.S. 10-year yields languished near its weakest since July.
Investors focus now shift to the November core personal consumption expenditure (PCE) index report, the Fed’s preferred measure of underlying inflation, due on Friday that could offer more cues on U.S. rate outlook.

Further progress on beating back inflation will be the decisive factor in any Fed decision next year to reduce interest rates, Chicago Fed Bank President Austan Goolsbee said.

Meanwhile, Swiss gold exports fell in November partly due to a drop in shipments to India, Swiss customs data showed on Tuesday.

Spot silver rose 0.2% to $24.06 per ounce, while platinum fell 0.3% to $951.46 and palladium was steady at $1,224.60.