Dec 20, 2023: Gold prices stabilized within a familiar range on Wednesday, maintaining levels between the low-$2,000s and $2,050 an ounce, reflecting ongoing market expectations of potential Federal Reserve interest rate reductions in 2024.
Despite this range-bound movement, gold remained above the critical $2,000 mark, with recent gains inching closer to the previous highs of nearly $2,150 an ounce.
As of 00:25 ET (05:25 GMT), spot gold stood at $2,040.03 an ounce, showing no significant change, while gold futures expiring in February saw a marginal increase of 0.1% to reach $2,053.05 an ounce. Tuesday had witnessed robust gains for both, coinciding with the dollar weakening to four-month lows and a decline in Treasury yields.
Market expectations for a rate cut in March 2024 persisted despite cautions from certain Fed officials regarding the market’s anticipation. The Fed Fund Futures prices indicated a 67.5% probability of a 25 basis point cut in March, up from the previous day’s 62.7%. Despite the Fed’s concerns over persistent U.S. inflation, the resilient U.S. economy might provide the Fed with leeway to maintain higher rates for an extended duration.
Gold’s potential gains might face limitations due to heightened risk appetite, particularly if signs point to a softer landing for the U.S. economy. Such conditions could diminish safe-haven demand for gold.
In the realm of industrial metals, copper prices hovered close to a more than four-month peak. Expectations of constrained supplies, with significant mine closures in Peru and Panama, anticipated to align with escalated demand, primarily attributed to the surge in electric vehicles and renewable energy sources.
Chinese copper demand is poised to rise alongside increased infrastructure spending by Beijing, although uncertainty looms regarding the timing of additional stimulus initiatives by China’s central bank, which maintained its benchmark lending rates at record lows.