Dec 23 2024: Gold prices saw a modest rise during Asian trading hours on Monday, recovering slightly from last week’s sharp losses. A softer-than-expected U.S. inflation reading provided some relief, though the Federal Reserve’s hawkish outlook continued to weigh on sentiment.
Spot gold rose 0.2% to $2,626.65 per ounce, while February gold futures dipped 0.1% to $2,642.32 an ounce by 22:15 ET (03:15 GMT).
The metal had suffered a 1% decline last week as the Fed indicated fewer interest rate cuts in 2025, citing persistent inflation concerns. This announcement boosted the U.S. dollar, exerting downward pressure on gold prices.
Gold Faces Continued Pressure Post-Fed Meeting
Gold prices reached a one-month low last Wednesday after markets adjusted expectations for future rate cuts. Current predictions, based on the CME FedWatch Tool, suggest the first cut of 2025 could occur in June, with a total of two reductions anticipated for the year.
Higher interest rates increase the opportunity cost of holding non-yielding assets like gold, making it less attractive compared to interest-bearing investments.
Friday’s release of the U.S. Personal Consumption Expenditures (PCE) price index—the Fed’s preferred inflation measure—showed a modest rise of 0.1% in November, slower than October’s 0.2% increase. This brought annual PCE inflation to 2.4%, slightly below expectations of 2.5%. However, core inflation, which excludes volatile food and energy prices, remained elevated at 2.8%, exceeding the central bank’s 2% target.
Other Precious Metals Rise
Platinum futures gained 0.8% to $940.15 an ounce, while silver futures rose 0.6% to $30.137 an ounce, reflecting broader gains in the precious metals market.
Dollar Nears Two-Year High
The Fed’s hawkish stance has strengthened the U.S. dollar, which benefits from higher interest rates as it increases returns on dollar-denominated assets.
The U.S. Dollar Index inched up 0.1% in early Asian trading, hovering near the two-year high reached last Friday. A strong dollar typically pressures gold prices, as it raises the cost of the metal for buyers using other currencies.
Copper Prices Recover Amid Softer U.S. Inflation, Await China Stimulus
Industrial metal prices, particularly copper, edged higher on Monday after last week’s over 1% decline. The softer U.S. inflation data improved market sentiment.
Copper also remains under pressure from the dollar’s strength, a result of the Fed’s hawkish pivot. Meanwhile, traders await details on new stimulus measures from China, the world’s largest copper importer. Reports suggest Beijing may ramp up fiscal spending in 2025 to boost economic growth.
Benchmark copper futures on the London Metal Exchange rose 0.3% to $8,978.50 a ton, while one-month copper futures climbed 0.6% to $4.1227 a pound.
