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Gold Prices Show Resilience Amid Rate Hike Expectations
Gold prices experienced little fluctuation during the Asian trading session on Friday, staying comfortably in a recent trading bracket. Confidence that the Federal Reserve will not take early action to reduce interest rates in 2024 continues to grow.
While the bullion is predicted to demonstrate moderate gains this week, they’re principally a rebound from the considerable losses of the preceding fortnight. Potential gold price growth is being impacted by a prolonged period of elevated interest rates, the relative strength of US dollar and anticipated Treasury yields.
The price of spot gold increased by a minor 0.1% to $2,025.80 per ounce, concurrently gold futures with an April expiry date increased by 0.2% to $2,035.15 per ounce at 00:15 ET (05:15 GMT). Both are expected to gain nearly 0.7% this week, following declines of up to 4% over the last two weeks.
The price of gold remained consistently within the $2,000-$2,050 per ounce bracket during 2024 thus far.
Interest Rate Reduction Bets Fading Amid Strong Labor Market
Gold’s prospects appear less bright as continuing signs suggest that markets are more reluctant to anticipate early rate reductions by the Federal Reserve.
Christopher Waller, a Federal Reserve Governor, stated the bank isn’t feeling rushed to trim interest rates prematurely, citing continued inflationary pressures. Other Federal Reserve officials have conveyed a similar message over this week, a sentiment reflected in the minutes from the Federal Reserve’s late January meeting.
Last Thursday's reports reveal that unemployment claims fell unexpectedly, signaling sustained labor market strength, giving the Fed more reasons to maintain higher interest rates.
Data from the CME Fedwatch tool reveal that there’s minimal expectation for a rate reduction in May and likelihood of no action taken in June has risen from 28.7% to 38.6%. Market players have reduced the probability of a rate cut in June from 53.6% to 49.7%.
Goldman Sachs analysts are no longer anticipating a rate cut in May. Gold prices may experience additional pressure with longer-term interest rates, as higher rates increase the opportunity cost of owning gold.
Gold Outperforms Other Precious Metals
Despite the circumstances, gold performed better compared to other precious metals this week. Platinum futures remained steady at $906.50 per ounce experiencing a 0.8% decline this week, while silver futures dropped 0.3% to $22.707 an ounce and a 3.2% decrease over the week.
Industrial Metal: Copper Steadies with Weekly Gain Hopes
As for industrial metals, March copper futures declined by 0.2%, to become $3.8855 per pound.
However, they were anticipated to show a 1.3% weekly gain, marking the second consecutive week of gain. This comes with optimism that China, the leading importer, will boost its economic recovery.
China declared multiple supportive economic measures and exhibited increased spending and holiday-related travel during Lunar New Year.
