Gold increases as expectations for Fed rate cuts in 2024 grow

26 Dec 2023 , 08:31 AM

Tuesday’s holiday-shortened trading saw a little increase in gold prices, which was supported by a declining US dollar and falling bond yields due to growing expectations that the Federal Reserve may slash interest rates as early as March of next year.

Spot gold was up 0.2% at $2,056.80 an ounce. An ounce of U.S. gold futures remained unchanged at $2,068.60.

Gold became more appealing to investors of other currencies as the dollar index dropped by 0.1% and the yield on the benchmark 10-year U.S. bond decreased to 3.8913%.

According to data released on Friday, prices in the United States decreased in November for the first time in over three and a half years. This resulted in an annual inflation increase that fell below 3% and raised expectations in the financial markets for a rate cut by the Federal Reserve in March of next year.

The CME FedWatch tool indicates that traders are currently pricing in an 88% possibility of a rate drop by the US Federal Reserve in March.

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

In the meantime, data released on Tuesday revealed that while business-to-business service inflation remained stable at 2.3% in November, Japan’s unemployment rate remained unchanged at 2.5% from the previous month.

Spot silver increased by 0.3% to an ounce at $24.23, while platinum remained unchanged at $970.63. Palladium increased to $1,212.34, up 0.8%.

Due to the public holiday of Boxing Day, markets in Australia, New Zealand, Hong Kong, and the Euro Zone are closed on Tuesday.

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