Gold firms on Fed rate-cut hopes; US data in focus

Tuesday saw a spike in gold prices as investors anticipated a plethora of economic data this week that would provide more light on the future for US interest rates. The likelihood of interest rate reduction in 2024 from the Federal Reserve also helped.

As of 05:45 GMT, spot gold was up 0.5% at $2,071.99 an ounce. Additionally, US gold futures increased by 0.5% to $2,081.00 an ounce.

“The short-term bullish trend in gold still remains intact above key support level of $2,017 per ounce,” said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA.

The demand for the safe-haven asset increased in 2023 as expectations that the US central bank may lower interest rates as early as March led to a 13% increase in gold prices, marking the first annual gain since 2020.

With the most recent Fed meeting minutes expected on Thursday, investors will now be looking for more clues about rate reduction this year.

“There was a change of tone in December FOMC meeting, so traders will be scrutinizing for much more clarity on this dovish tilt, especially on what the Fed officials are looking out for,” OANDA’s Wong said.

Markets are now pricing in an 86 per cent chance of rate cuts from the Fed in March, according to CME FedWatch tool. Lower interest rates decrease the opportunity cost of holding non-yielding gold.

Also on the radar, data on US job openings and December non-farm payrolls will also been keenly watched for more clarity on Fed rate path.

On the technical front, spot gold may retest support of $2,062 per ounce, a break below could open the way towards $2,053, according to Reuters technical analyst Wang Tao.

Elsewhere, spot silver rose 1 per cent to $24 and palladium edged up 0.2 per cent to $1,100.45 per ounce. Platinum fell 0.2 per cent to $984.77.