Gold prices steady as early rate-cut hopes drive strong gains
Investing.com-- Gold prices kept to a tight range in Asian trade on Wednesday after rising optimism over early interest rate cuts by the Federal Reserve drove a strong melt-up in prices through December.
The yellow metal blew past key levels in recent sessions, and was now trading less than $100 below a record high hit at the beginning of the month. Gold’s recent rally was triggered by the Fed signaling it was done raising interest rates, and that it will trim lending rates in 2024.
But markets bet that the Fed will cut interest rates by as soon as March 2024, especially as recent data showed sustained cooling in U.S. inflation.
Spot gold steadied at $2,064.84 an ounce, while gold futures expiring in February rose 0.3% to $2,075.85 an ounce by 01:14 ET (06:14 GMT).
Gains in December put gold prices on course to rise between 12% to 14% in 2023.
But the yellow metal still lagged most risk-driven assets, particularly stocks, given that U.S. interest rates remained high. By comparison, the S&P 500 was set to add about 24% in 2023.
Still, the yellow metal stands to benefit further in 2024, especially as U.S. interest rates decrease and as global economic conditions deteriorate. While the U.S. economy has remained somewhat resilient, other parts of the world- such as the euro zone and China- are grappling with a sustained slowdown in growth.
The Fed is widely expected to trim interest rates between three to five times in 2024, with markets betting that the first of the expected rate cuts could come by as soon as March 2024.
High interest rates push up the opportunity cost of investing in gold- a trend that had limited any major gains in the yellow metal through most of 2023.
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