Gold firmer on support from dovish Fed

Bengaluru — Gold prices extended their climb to a one-week high on Thursday after the US Federal Reserve flagged an end to its tightening cycle and signalled lower borrowing costs in 2024, sending the dollar and treasury yields tumbling.

Spot gold was up 0.3% at $2,032.07/oz, at 3.41am GMT, after rising 2.4% on Wednesday. US gold futures jumped 2.5% to $2,046.80.

“The Fed’s dovish pivot stuck a rocket under gold prices, which used $1,980 support as a springboard to break its $2,000 per ounce glass ceiling,” said Matt Simpson, a senior analyst at City Index.

“This certainly places the US dollar in a weak spot heading into the back of the year, a month which tends to generate bearish returns for dollar and benefit gold.”

The Fed kept interest rates steady for the third meeting in a row, as was widely expected. A near unanimous 17 of 19 Fed officials project the policy rate will be lower by the end of 2024 than it is now.

The dollar fell to a two-week low against its rivals, making gold less expensive for other currency holders, while the US benchmark 10-year yield dropped to its lowest level since August.

Markets are now pricing in around a 73% chance of a rate cut in March from the Fed, according to CME FedWatch tool.

Lower interest rates tend to support non-interest-bearing bullion.

“We expect the Fed to start cutting in the third quarter in 2024. Aided by further central bank buying, that should see the gold price reach new highs in 2024,” ANZ analysts wrote in a note.

Market participants now await other central bank decisions, including the European Central Bank (ECB) and the Bank of England (BOE) later in the day.

Spot silver rose 0.4% to $23.83/oz, while platinum gained 0.3% to $937.25 and palladium climbed 0.2% to $994.82.

Reuters