Gold heads higher on hopes of rate cuts

Bengaluru — Gold prices extended their rise on Friday and were set to log their first weekly gain in three, as investors stepped-up bets that the US Federal Reserve is done raising interest rates, pressuring the dollar and Treasury yields.

Spot gold was up 0.2% at $1,984.48/oz at 2.55am GMT, after hitting its highest since November 6 in the last session. US gold futures were steady at $1,987.20.

Bullion is up 2.5% so far this week.

“There’s probably a couple of set of sequences in which we could see gold push sustainably through $2,000, and that’s a very rapid deterioration in the data, which suggests that again, rate cuts on the horizon,” said Kyle Rodda, a financial market analyst at Capital.com.

“Alternatively the war is still bubbling, simmering away in the background,” Rodda added.

Data this week showed the US consumer price index was unchanged in October and the core rate was up 0.2%, weaker than anticipated. Producer prices fell by the most in three-and-a-half years.

Market participants revised their forecasts for future Fed action.

Lower interest rates decrease the opportunity cost of holding gold, a non-yielding bullion used as a hedge against inflation.

Meanwhile, the number of Americans filing new claims for unemployment benefits increased more than expected last week, which could help the Fed’s fight against inflation.

The dollar was on track for a weekly drop, making gold less expensive for buyers holding other currencies, while yields on 10-year Treasury notes hovered near two-month lows.

Spot silver rose 0.4% to $23.8/oz and up 7.2% for the week so far, while platinum was flat at $892.65, but has gained 6.4% for the week.

Palladium was also steady at $1,037.46/oz, but was heading for its best week in a year. 

Reuters