Gold steady at more than three-week high on US Q1 rate cut bets

Bengaluru — Gold prices steadied after hitting a more than three-week peak on Thursday, deriving support from a weaker US dollar and bond yields as markets wager on rate cuts by the Federal Reserve early next year.

Spot gold was steady at $2,072.09/oz p at 1206 GMT after earlier rising as high as 2,088.29, the most since December 4. US gold futures were down 0.5% at $2,082.20.

The dollar index fell to a fresh five-month low and was headed for a yearly decline. The benchmark 10-year bond yield was down near its lowest levels since July, boosting bullion's appeal.

“Lack of catalysts in a period of thin liquidity is likely keeping gold steady. Next catalyst ... is likely to come from the leading indicators (ISM, PMI) and the job report at the start of 2024,” UBS analyst Giovanni Staunovo said.

“We look for higher gold prices over the next 12 months, with weaker economic data and lower inflation in the US forcing the Fed to cut rates and this should support gold.”

Markets await the US initial jobless claims data, due at 1330 GMT, for further cues on Fed monetary policy.

Investors are betting on an 88% chance of a rate cut as early as March, according to the CME FedWatch tool, a huge swing from a month ago when the probability was just 21%.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

On the physical front, China's net gold imports via Hong Kong rose about 37% in November from the previous month, data showed.

In other metals, spot silver was steady at $24.2276/oz and was poised to end the year with about a 1.2% gain.

Platinum was flat at $993.65 and palladium fell 1.7% to $1,134.13.

Reuters