Gold prices rose to three-week highs today as the US dollar and bond yields fell to multi-month lows on growing bets that the US central bank will start cutting interest rates in early March next year.
Spot gold rose 0.5 percent to $2,086.66 an ounce, hitting its highest level since Dec. 4 when prices jumped to a record high of $2,135.40.
US gold futures rose 0.2 percent to $2,097.10 an ounce. Gold appeared on track for its best year in three years with a gain of 14%, as the war in Ukraine and tensions in the Middle East boosted safe-haven flows and bets on a US interest rate cut boosted the metal’s appeal.
Bets on a rate cut by the US Federal Reserve were boosted after cold inflation data, with traders now expecting an 88% chance of monetary policy easing in March.
Gold prices are expected to remain above $2,000 an ounce over the next year, mainly due to economic, political and geopolitical risks around the world.
Low interest rates reduce the opportunity cost of holding non-yielding bullion. The dollar index fell to a five-month low and is heading for its worst annual performance since 2020, while benchmark 10-year US bond yields remained near their lowest level since July. Meanwhile, London’s gold price index hit an all-time high of $2,069.40 an ounce at an auction on Wednesday afternoon, the London Bullion Market Association (LBMA) reported. Spot silver rose 0.8% to $24.44 an ounce and is heading to end the year with an annual gain of close to 2%.
Gold prices rise amid optimism over federal interest rate cuts
Gold prices traded around a three-week high near $2088 an ounce during the Asian session on Thursday. Improved risk appetite due to the prospect of the Fed cutting interest rates in the first quarter of 2024, led to a rise in the price of the yellow metal.
Gold prices are expected to remain above $2,000 an ounce over the next year, mainly due to economic, political and geopolitical risks around the world.
Prices for the yellow metal are likely to remain above $2,000 an ounce in the short term. The long-term bullish outlook for gold depends on several factors including expected interest rate cuts by the US Federal Reserve. Economic, political and geopolitical risks are expected to remain high in 2024, supporting gold as a safe-haven asset. The Fed is expected to cut interest rates by 50 to 125 basis points in 2024.
Positive price trends will be further supported by increased central bank purchases of gold. Gul added that uncertainty about future monetary policies due to the upcoming US presidential election in late 2024 could stimulate investments in gold.
Gold is expected to trade between $1,975 to $2,000 per ounce during the first half of 2024 and between $2,050 to $2,100 in the second half of the year. The gold market had a turbulent journey in 2023, with prices exceeding $2,100 an ounce before retreating back to levels of $2,050 per ounce.
