Feb 23 2024: In Asian trading on Friday, gold prices remained relatively unchanged and stayed within a recently established trading range, reflecting a growing belief that the Federal Reserve will refrain from initiating early interest rate cuts in 2024.
Despite some upward movement this week, largely seen as a recovery from significant losses in the preceding two weeks, gold prices were held back by persistent concerns over prolonged higher interest rates. The strength of the dollar and Treasury yields further limited significant gains in gold prices.
Spot gold saw a minor increase of 0.1% to $2,025.80 per ounce, while gold futures expiring in April rose by 0.2% to $2,035.15 per ounce by 00:15 ET (05:15 GMT). Both instruments were on track to register approximately a 0.7% increase for the week after enduring losses of up to 4% over the past fortnight.
Gold prices continued to remain within the trading range of $2,000 to $2,050 per ounce, which has been consistent throughout much of 2024.
Expectations of early rate cuts by the Fed dwindled as various indicators pointed towards diminishing market sentiments.
Fed Governor Christopher Waller emphasized that the central bank was not inclined to implement early interest rate cuts, particularly with inflation exhibiting persistence. Similar signals were echoed by several other Fed officials earlier in the week, along with insights from the minutes of the Fed’s late-January meeting.
Thursday’s labor data revealed an unexpected drop in weekly jobless claims, signaling ongoing resilience in the labor market, which further strengthened the Fed’s stance to maintain higher interest rates.
Market sentiment, as reflected in the CME Fedwatch tool, indicated a nearly complete pricing-out of the possibility of a May rate cut, with the probability of a hold in June escalating to 38.6% from the previous day’s 28.7%. Traders also downgraded the likelihood of a June rate cut from 53.6% to 49.7%, with Goldman Sachs analysts no longer anticipating a cut in May.
The prospect of persistently higher interest rates exerted additional pressure on gold prices, as elevated rates elevate the opportunity cost of investing in bullion.
Nevertheless, gold outperformed other precious metals this week. Platinum futures stabilized at $906.50 per ounce, marking a 0.8% decrease for the week, while silver futures dipped by 0.3% to $22.707 per ounce, registering a 3.2% decline for the week.
In the realm of industrial metals, copper futures expiring in March recorded a 0.2% decline to $3.8855 per pound. However, they exhibited a 1.3% increase for the week, marking their second consecutive week of gains, buoyed by hopes of economic revitalization in top importer China. This optimism stemmed from Beijing’s announcement of various economically supportive measures throughout the week, coupled with official data indicating heightened spending and travel activity during the Lunar New Year holiday.