Gold gains after US data spurs Fed rate-cut prospects

By Sherin Elizabeth Varghese

(Reuters) – Gold prices gained on Thursday as the dollar retreated after U.S. economic data fueled expectations the Federal Reserve would cut interest rates in March next year.

Spot gold was up 0.7% at $2,043.79 per ounce by 2:55 p.m. ET (1955 GMT), eyeing its best session in six. U.S. gold futures settled 0.2% higher at $2,051.30.

Data showed U.S. gross domestic product increased at a 4.9% annualized rate last quarter, revised down from the previously reported 5.2% pace, while weekly jobless claims increased slightly.

“GDP data came in a bit soft and gold charged up. Market is craving the burgeoning Fed pivot,” said Tai Wong, a New York-based independent metals trader.

The market expects an 83% chance of a Fed rate cut by March, compared with 79% before the data, according to the CME FedWatch tool.

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

The U.S. dollar fell 0.5% and 10-year Treasury yields hovered near a five-month low. [US/]

The Fed’s dovish stance has caused markets to price in several rate cuts in 2024. However, some Fed officials have spoken out against imminent rate cuts.

Market focus has now shifted to the U.S. core personal consumption expenditure (PCE) report on Friday.

“Gold will continue to maintain price levels above $2,000 and these expectations we have of lowering inflationary pressures will continue to foster the sideways to higher movement in gold,” said David Meger, director of metals trading at High Ridge Futures.

Silver gained 0.9% to $24.33 per ounce, hitting a 16-day high.

Platinum rose 0.4% to $962.82, near a 16-week peak hit last session, and palladium was up 1.3% at $1,211.71.

“The fundamental backdrop is stronger for platinum and it should continue to outperform palladium going forward,” BofA said in a research note dated Wednesday.

BofA expects rising palladium surpluses under its base case next year, with a possibility of prices falling to a low of $500 per ounce if there are no supply cuts.

(Reporting by Sherin Elizabeth Varghese and Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri)