Gold heads for weekly gain as Fed strikes dovish stance

Gold bars arranged at the Korea Gold Exchange store in Seoul, South Korea, on Friday, Oct. 13, 2023.

SeongJoon Cho | Bloomberg | Getty Images

Gold prices fell on Friday, but eked out a weekly rise as the Federal Reserve shifted to a dovish stance and projected lower interest rates next year.

Spot gold fell 0.8% to $2,018.56 per ounce but gained 0.8% for the week. U.S. gold futures settled 0.4% lower at $2,035.70.

“The gold market will continue to mirror what the expectations from the Fed are,” said Everett Millman, chief market analyst at Gainesville Coins.

“If the U.S. economy does not improve early in 2024 then that’s a very strong sign that gold will continue to push near an all-time high.”

Earlier in the week, Fed Chair Jerome Powell said the prolonged tightening of monetary policy is likely over as a discussion of lower borrowing costs comes “into view”, an outlook affirmed by 17 of 19 policymakers.

Markets are seeing a 70% chance of a rate cut in March, CME FedWatch tool showed.

Lower interest rates increase the appeal of non-yielding bullion.

But, New York Fed President John Williams pushed back on surging market expectations of interest rate cuts.

“If more Fed officials walk back Powell’s FOMC comments before Christmas, then we could see a deeper correction in gold prices, but this will make the market tread a little more carefully,” said Tai Wong, a New York-based independent metals trader.

The dollar firmed but headed for a weekly drop, making gold cheaper for overseas buyers, while 10-year Treasury yields eyed their worst week since March.

Silver fell 1.3% to $23.83 per ounce, and platinum fell 1.95% to $939.25. Both were set for weekly gains.

Palladium rose 6.3% to $1,1171.32 and was headed for its best week since March 2022. Prices had touched a five-year low earlier this month.

“The bounce (in palladium) is being accelerated by short covering from funds who have played palladium with a short bias all year,” said Ole Hansen, Saxo Bank’s head of commodity strategy.

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