Dec 19 2024: Gold prices rebounded on Thursday from a one-month low after the Federal Reserve’s anticipated rate cut, although the central bank’s cautious stance on future rate reductions weighed on the metal’s outlook.
Spot gold climbed 1.3% to $2,618.11, while February gold futures slipped 1.2% to $2,620.79 per ounce by 22:51 ET (03:51 GMT). The rebound followed a sharp 2% drop in prices overnight after the Fed suggested fewer rate cuts in 2025 due to persistent inflation concerns.
Fed Signals Slower Rate Cuts, Clouding Gold’s Prospects
The Federal Reserve lowered interest rates by 25 basis points on Wednesday but signaled a slower pace of cuts in the coming years. Lower rates typically benefit gold as they reduce the opportunity cost of holding non-yielding assets like bullion.
However, the Fed’s hawkish guidance dampened investor sentiment, with markets now expecting only two cuts in 2025 compared to prior projections of four. Fed Chair Jerome Powell emphasized that future rate reductions would depend on inflation trends, hinting at a prolonged period of elevated borrowing costs.
While the Fed’s cautious stance aims to tackle inflation, it reflects confidence in the U.S. economy’s resilience, which could weaken demand for safe-haven assets like gold. Additionally, expectations of a stronger dollar—already at a two-year high after the Fed meeting—could further pressure bullion prices.
Global Monetary Policies Add to Market Uncertainty
The Bank of Japan maintained its interest rates on Thursday, citing concerns over the economic outlook and inflation path. This cautious approach highlights global uncertainties that could influence precious metal markets.
Other Precious Metals Mixed
Platinum futures edged up 0.7% to $928.90 per ounce, reflecting some positive sentiment, while silver futures dropped sharply by 2.7% to $29.922 per ounce.
Industrial Metals Hit by Stronger Dollar
Copper prices continued to decline on Thursday, pressured by the Fed’s hawkish tone and the resulting strength in the U.S. dollar. Benchmark copper futures on the London Metal Exchange fell 1.4% to $8,921.50 per ton, while one-month copper futures remained largely steady at $4.089 per pound.
Although reports of increased fiscal spending in China—the world’s top copper importer—offered limited support, the stronger dollar overshadowed any potential upside. The U.S. Dollar Index rose 0.1% in Asian trade, reaching its highest level in over two years.
