Gold gains as rising Fed rate cut bets boost appeal

Gold scaled a more than two-week high on Friday, rising for a second week as the dollar and US Treasury yields slipped on rising expectations the Federal Reserve will cut interest rates early next year.

Spot gold was up 0.4% at $2,052.69 per ounce as of 3:50 p.m. ET (20:50 GMT), its highest level since Dec. 4, putting it on course for a 1.7% weekly gain.

U.S. gold futures settled 0.9% higher at $2,069.1.

“Precious metals, including gold, are being driven higher by very aggressive rate cut expectations with the market pricing in a Fed cut in March and a total of 150 bps in 2024,” said Tai Wong, a New York-based independent metals trader.

“It’s priced for perfection but the market usually discounts too zealously.”

Traders on Friday raised bets that the U.S. central bank will start cutting rates in March after government data showed price pressures continued to cool last month.

Annual U.S. inflation slowed further below 3% in November and underlying price pressures continued to abate.

The dollar index hit a near five-month low, making gold more appealing to foreign buyers. Benchmark 10-year bond yields were also close to their weakest levels since July.

Gold will continue to be helped by weaker Treasury yields and the U.S. dollar index and concerns about a slowdown in the economy, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

“The current technical breakout could really push prices up to that $2,100 level. It could retest those recent contract highs.”

On the physical front, gold demand in India fell sharply due to high domestic prices.

Silver fell 1.2% to $24.12 per ounce, after touching a two-week high earlier. Palladium was down 0.9% at $1,202.46 after hitting its highest since Oct. 2 earlier.

Platinum rose 0.7% to $969.67, its highest since Sept. 1. All three metals were on track for their second consecutive week of gains.