Fed rate drop bets boost attractiveness as gold is set to have stunning year

29 Dec 2023 , 10:17 AM

Due to increased demand for safe haven assets as well as robust expectations of early interest rate cuts by the US due to the conflict in Ukraine and unrest in the Middle East, gold prices saw their highest level of growth in three years on Friday.

Spot gold was up 0.2% at $2,068.95 per ounce. With a 14% increase so far this year, it is on track to record its largest yearly gain since 2020. American gold futures decreased by 0.2% to $2,078.70 an ounce.

Following lower inflation figures, bets on interest rate cuts from the US Federal Reserve have strengthened. According to the CME FedWatch tool, traders are now pricing in an 88% chance of monetary policy easing in March.

The opportunity cost of owning non-yielding bullion is reduced by lower interest rates.

The dollar index dropped 0.1% on Friday and was on track to record its worst year performance in three years, which increased the allure of gold for investors of foreign currencies.

Ten-year Treasury note yields hovered around 3.8350%, their lowest level since July.

According to data released on Thursday, China’s net imports of gold through Hong Kong increased by almost 37% in November compared to October, as the world’s largest buyer loosened import restrictions to accommodate the metal’s anticipated demand for the Chinese New Year.

Israeli troops also launched attacks in the centre and southern Gaza Strip, where tens of thousands of Palestinians have already been forced from their homes due to the Israeli-Hamas conflict, and where locals have been bracing for a fresh ground operation.

Spot silver increased 0.2% to $23.83 an ounce, but it appeared to finish the year mostly unchanged.

Palladium increased 0.1% to $1,133.73 per ounce, while platinum remained stable at $1,002.50 per ounce, or almost six months’ high. Every autocatalytic metal was proceeding as planned.

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