Dec 20 2024: Gold prices remained steady near a one-month low during Asian trading on Friday but were on track for weekly losses. The U.S. Federal Reserve’s forecast of fewer interest rate cuts in 2025 continued to weigh on investor sentiment.
The Fed implemented a 25-basis-point rate cut as anticipated but surprised markets by signaling a slower pace of reductions, projecting just two more cuts in 2025 compared to prior expectations of four.
Spot gold inched up to $2,596.82 per ounce, while February gold futures rose 0.1% to $2,610.30 per ounce as of 22:35 ET (03:35 GMT). Despite the modest recovery, spot gold faced nearly 2% losses this week, pressured by a strong U.S. dollar, which climbed to its highest level in over a year.
Hawkish Fed Stance Weighs on Gold; Focus Shifts to PCE Data
Gold prices hit a one-month low on Wednesday following the Fed’s indication that interest rates will remain elevated for a prolonged period.
Higher rates diminish gold’s appeal by increasing the opportunity cost of holding the non-yielding metal. Traders now anticipate only one quarter-point rate cut in 2025, citing ongoing economic resilience and persistent inflation concerns.
U.S. economic data released on Thursday reinforced the Fed’s stance:
- GDP Growth: The economy expanded faster than previously estimated in Q3.
- Job Market: Initial jobless claims fell more than expected, signaling a gradual slowdown in the labor market.
The robust economic outlook dampened the demand for safe-haven assets, further pressuring gold. Market participants now await the release of the Personal Consumption Expenditures (PCE) price index—the Fed’s preferred inflation measure—for additional insights into the economic trajectory.
Other Precious Metals Under Pressure
- Platinum Futures: Dropped 0.4% to $921.75 per ounce.
- Silver Futures: Declined 0.4% to $29.302 per ounce.
Copper Rebounds on U.S. Data and China Stimulus Hopes
Copper prices recovered after Thursday’s decline, bolstered by robust U.S. economic data that raised hopes for improved demand. Additionally, expectations of increased fiscal stimulus in China supported the metal.
Beijing is reportedly planning to enhance fiscal spending in 2025, while the People’s Bank of China maintained its benchmark loan prime rate on Friday. Although looser monetary conditions have provided limited economic support recently, the prospect of further stimulus aided sentiment.
- London Metal Exchange Benchmark Copper Futures: Rose 0.4% to $8,925.30 per ton.
- One-Month Copper Futures: Held steady at $4.0855 per pound.
