Gold prices gained on Friday and were headed for their best year since 2020, supported by rising expectations that the US Federal Reserve could begin cutting interest rates as early as March.
Spot gold was quoted at $2,065.29 per ounce in early trade. US gold futures, however, lost 0.4% to $2,074.40. Thai selling prices were quoted on Friday at 33,650 baht per baht-weight (15.2 grammes), according to the Thai Gold Traders Association.
Gold has risen about 14% so far this year, reaching an all-time high of $2,152.30 on Dec 4, and heading for its biggest annual gain since 2020.
“In the near term, gold could trade mostly in the $1,950 to $2,150 range, with volatility fuelled by macroeconomic data and the correlated expectations about forthcoming cuts in US interest rates, but also by unexpected developments in geopolitical risks,” said Daniela Corsini, an economist with the Italian banking group Intesa Sanpaolo.
Analysts expect that gold’s recent rally could carry over to 2024 on the back of a softer US dollar and Treasury yields, as traders wager on a pivot to interest-rate cuts early next year.
“In case of bullish expectations about the Fed’s monetary easing and unexpected escalation in geopolitical risks, gold could hit new records, with $2,300 being the probable maximum top,” Corsini said.
Lower interest rates decrease the opportunity cost of holding non-yielding gold and weigh on the dollar.
The dollar index fell and was headed for a 2% decline in 2023, snapping the strong gains of the last two years. Yields on 10-year Treasury notes ticked up slightly, but were still languishing near their lowest level since July.
Spot silver fell 1% on Friday to $23.69 per ounce and was on rack for a 1% yearly decline. Platinum lost 0.1% to $1,001.06 per ounce, while palladium lost 1.5% to $1,115.62. Palladium is down 38% — its biggest drop since 2008.
