Feb 2, 2024: Gold prices stabilized near a two-week high, breaching key levels, as persistent expectations of Federal Reserve interest rate cuts weighed on the dollar. Despite signals from the Fed suggesting delayed rate cuts this year, gold capitalized on a weaker dollar, edging closer to 2024 highs. However, ahead of the nonfarm payrolls data, gold’s gains tempered as markets anticipated cues that could influence the Fed’s rate plans.
Spot gold inched up 0.1% to $2,056.20 per ounce, surpassing the $2,050 level for the first time in two weeks. Gold futures expiring in March also rose 0.1% to $2,073.35 an ounce. Both were up approximately 1.9% for the week, poised to break a two-week losing streak. Gold’s recovery followed a challenging start to 2024, marked by a 1.2% decline as expectations for a March interest rate cut diminished.
While the Fed tempered expectations for a March rate cut, traders, according to the CME FedWatch tool, started pricing in the possibility of a 25 basis point cut in May, supporting bullion prices. Goldman Sachs analysts anticipate the Fed to cut rates at least four more times after May. Although U.S. rates are expected to stay high in the short term, the potential for eventual rate declines, mentioned by Fed Chair Jerome Powell, contributes to positive sentiment for gold prices.
Nonfarm payrolls data, expected later on Friday, is anticipated to play a significant role in shaping the Fed’s outlook. While the central bank emphasizes a data-driven approach, a cooling labor market is considered in rate-cut decisions. Analysts predict the data to indicate a cooling in the labor market for January, but consistently positive surprises in the readings have been observed.
In contrast, copper prices dipped on Friday, heading for weekly losses, primarily due to concerns over a sluggish economic recovery in China, the leading copper importer.