Gold 1.6% stronger this week as dollar retreats

Gold prices climbed on Friday to their highest level in nearly three weeks, as rising bets on Federal Reserve interest rate cuts early in 2024 pushed the dollar and bond yields lower ahead of much awaited US inflation data.

Spot gold was up 0.2% at $2,049.49/oz at 2.17am GMT, after hitting its highest level since December 4 earlier in the session. Bullion has risen 1.6% so far this week. US gold futures rose 0.5% to $2,060.80/oz.

“US real yields have been ticking downwards because of increasing expectations for the first rate cut from the Fed to come in March and that is a positive catalyst for gold prices right now,” said Kelvin Wong, a senior market analyst for Asia Pacific at Oanda. “Also, there is some safe-haven buying coming due to issues in the Red Sea.”

The dollar index languished near a five-month low, making gold more attractive for other currency holders, while benchmark US 10-year bond yields hovered near their lowest level since July.

Traders are now pricing in an 83% chance of a Fed rate cut by March, according to the CME FedWatch tool. Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Fed officials have been pushing back against the idea of rapid rate cuts, but those remarks have done little to change investor sentiment.

All eyes are now on the November core personal consumption expenditure (PCE) index report, the Fed’s preferred measure of underlying inflation for more clarity on the US interest rate outlook. It is due at 1.30pm GMT.

Market participants expect the index to have risen 3.3% on an annual basis from October’s 3.5%.

Silver was steady at $24.41/oz, while platinum eased 0.1% to $962.13 and palladium was flat at $1,213.10. All the three metals were on track for their second consecutive weekly gain.

Reuters