Gold hits three-week high on hopes of US Fed cutting rates

By Deep Kaushik Vakil

(Reuters) – Gold scaled a three-week peak on Wednesday as traders bought zero-yield bullion in anticipation of U.S. interest-rate cuts next year, while a dip in the dollar and bond yields also supported prices.

Spot gold was up 0.5%, at $2,076.45 per ounce – its highest since Dec. 4 – by 2:10 p.m. ET (1910 GMT) and on track to gaining nearly 14% in 2023, if gains hold. U.S. gold futures settled 1.1% higher, at $2,093.10.

The dollar index hit a five-month low, and eyed its first yearly slide since 2020, making bullion more attractive for overseas buyers. Benchmark 10-year Treasury yields also touched their lowest since July 24. [USD/] [US/]

London’s gold price benchmark climbed to an all-time high of $2,069.40 per troy ounce, surpassing the previous record set in August 2020, the London Bullion Market Association said.

“Going into the new year, the theme seems to be from central banks around the world that lower interest rates are coming and with that, gold will have nothing but upside to go here,” said Bob Haberkorn, senior market strategist at RJO Futures.

The Federal Reserve is set to start the new year with fresh evidence that U.S. price pressures are firmly in retreat, with data last week marking the first time since March 2021 that the annual PCE price index was below 3%.

The cooler inflation data emboldened expectations of a rate cut by the Fed in March, with traders now pricing in about a 90% chance, according to the CME FedWatch tool.

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

Silver gained 0.1%, to $24.225 per ounce, while platinum rose 1.7% to a six-month high of $994.91.

Palladium fell 2.1%, to $1,149.30, bracing for its worst year since 2008 if losses hold.

(Reporting by Deep Vakil in Bengaluru; Additional reporting by Daksh Grover; Editing by Christina Fincher, David Gregorio and Pooja Desai)