Rate-Cut Rally Runs Dry: Gold Prices Dive After Four-Week High

5 Jan 2024 , 10:35 AM

As investors looked to a crucial jobs report that was coming later in the day for further indications about interest rates, gold prices were headed for their first weekly decline in four on Friday due to the dollar’s strengthening and dwindling expectations of an early interest rate cut in the United States.

Spot gold was up 0.1% at $2,054.10 an ounce. It had gained for three weeks in a row before declining by roughly 0.8% this week. The ounce of U.S. gold futures increased by 0.2% to $2,053.00.

The dollar index was on track for its best week since July 2023, which increased the cost of bullion for holders of foreign currencies. Data released on Thursday indicated that private companies hired more workers in December than anticipated and that weekly jobless claims decreased more than anticipated last week, pointing to ongoing resilience in the U.S. labour market.

The Federal Reserve’s meeting minutes from December 12–13 were made public on Wednesday. They revealed that while officials were confident that inflation was beginning to stabilise, they also acknowledged a high level of uncertainty around the Fed’s projected rate decrease.

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

According to the CME FedWatch tool, market players have reduced their expectations of the Fed relaxing monetary policy, pricing in a 65% likelihood of a rate cut by March, down from a 90% chance a week earlier.

For more guidance, investors are currently awaiting the release of the U.S. non-farm payrolls report, which is scheduled for 1330 GMT.

Spot platinum fell 0.3% to $953.61 while silver increased 0.6% to $23.13 an ounce. Palladium recovered after an eight-session decline by 0.7% to $1,044.23.

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