Gold Gleams as Rate Hike Clouds Part: 2024 Starts with Bullion Brilliance!

2 Jan 2024 , 09:50 AM

The possibility of interest rate reductions from the Federal Reserve in 2024 helped to push up gold prices on Tuesday. Investors are also anticipating a plethora of economic data this week that will provide additional clarity on the future for U.S. interest rates.

Spot gold was up 0.3% at $2,068.29 per ounce. In 2023, the price of bullion increased by 13%, marking the first annual gain since 2020. American gold futures increased by 0.3% to $2,077.40 an ounce.

For fresh hints about rate reduction this year, this week’s focus will be on the minutes of the most recent Fed meeting, which are due on Thursday. This week, observers will be closely monitoring data on December non-farm payrolls and job vacancies in the United States.

The Fed surprised everyone by taking an unexpectedly dovish stance during its policy meeting in December and forecast 75 basis points of rate reductions by 2024.

The CME FedWatch tool indicates that markets are currently pricing in an 86% possibility of rate decreases from the US Federal Reserve in March.

Because lower interest rates weaken the dollar and reduce the opportunity cost of owning non-yielding bullion, gold becomes more affordable for investors holding foreign currencies.

On the first trading day of the year, the dollar index remained stable following its first annual drop since 2020. 

The largest exchange-traded fund backed by gold in the world, SPDR Gold Trust, reported a 0.16% decrease in its holdings from 880.55 tonnes on Thursday to 879.11 tonnes on Friday. 

Demand for physical gold in India remained weak last week as purchasers were deterred from purchasing during the year-end vacations by the local prices’ surge to almost all-time highs.

Spot silver increased by 0.5% to an ounce at $23.88, while platinum remained stable at $987.61. Palladium fell $1,088.82, or 0.9%.

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