Spot Gold heads for weekly advance on Fed rate cut prospects

Spot Gold was on track to register a weekly advance, supported by prospects of Federal Reserve rate cuts in 2024, which drove the US Dollar and US bond yields lower.

The Federal Reserve left the fed funds rate target range without change at 5.25%-5.50% for a third successive policy meeting in December, as largely expected.

Fed Chair Jerome Powell said a discussion of rate cuts was coming “into view”. Fed policy makers indicated 75 basis points of rate cuts next year, as recent indicators suggested that economic growth had slowed, job gains had moderated and the unemployment rate had remained low.

The US central bank now forecasts core PCE inflation to be at 3.2% in 2023, a revision down from 3.7% in the September projection, and at 2.4% in 2024, also a downward revision from 2.6% in September.

“The prospect of (rate) cuts is very bullish for gold – lower yields boost the attractiveness of gold and if the cuts are coming because of a looming recession, then that just sweetens things for gold,” Kyle Rodda, financial market analyst at Capital.com, was quoted as saying by Reuters.

“In the very near-term, gold is at risk from a reversal in yields – bonds are a bit overbought technically. In the long-run, the rate-cut story augurs very well for gold.”

The yield on benchmark US 10-year Treasury Notes was near lows last seen in July.

As of 8:04 GMT on Friday Spot Gold was edging up 0.10% to trade at $2,038.39 per troy ounce. Yesterday the commodity went up as high as $2,047.93 per troy ounce, or its highest level since December 4th ($2,148.99).

The yellow metal looked set to register a 1.71% weekly gain.

Gold Futures for delivery in February were edging up 0.38% on the day to trade at $2,052.70 per troy ounce.

Elsewhere, Silver Futures for delivery in March were up 0.32% to trade at $24.465 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.12% to 102.074 on Friday. Yesterday the DXY went down as low as 101.770, or its weakest level since August 4th (101.742).