Gold firms on Fed rate-cut prospects

Bengaluru — Gold prices rose on Tuesday, supported by the prospect of interest rate cuts by the Federal Reserve, while investors look forward to a slew of economic data this week for more clarity on the US rate outlook.

Spot gold was up 0.3% at $2,069.19 an ounce at 3.50am GMT. US gold futures also gained 0.3% to $2,078.10/oz.

“The short-term bullish trend in gold still remains intact above key support level of $2,017 an ounce,” said Kelvin Wong, a senior market analyst for Asia Pacific at Oanda.

Bullion prices gained 13% in 2023 to post their first annual gain since 2020 as hopes that the Fed could cut interest rates as early as March lifted demand for the safe-haven asset.

Investors’ focus now shifts to the minutes from the last Fed meeting, which is due on Thursday, for more cues on rate cuts this year.

“There was a change of tone in the December FOMC [Federal Open Market Committee] meeting, so traders will be scrutinising for much more clarity on this dovish tilt, especially on what the Fed officials are looking out for,” Wong said.

Markets are now pricing in an 86% chance of rate cuts from the Fed in March, according to the CME FedWatch Tool. Lower interest rates decrease the opportunity cost of holding non-yielding gold.

Data on US job openings and December non-farm payrolls will also be closely watched for more clarity on the Fed’s rate path.

On the technical front, spot gold may retest support at $2,062/oz — a break below that could open the way towards $2,053, according to Reuters technical analyst Wang Tao.

Elsewhere, spot silver rose 0.8% to $23.94/oz, while platinum fell 0.1% to $986.29 and palladium lost 0.1% to $1,097.56.