Gold prices experienced a decline on Friday after reaching a five-week high in the previous session, influenced by a strengthening U.S. dollar. However, the precious metal is on track for a weekly rise, buoyed by expectations of a potential rate cut by the Federal Reserve next week.
Key Highlights:
Current Pricing:
Spot gold (XAU=) fell 1.1% to $2,652.29 per ounce as of 1:43 p.m. ET (1843 GMT), while the U.S. dollar maintained its strength at a two-week high.
U.S. gold futures (GCv1) settled 1.2% lower at $2,675.80.
Weekly Performance:
Despite the dip, gold has risen over 0.8% this week, hitting its highest level since November 6 on Thursday.
Market Insights:
Daniel Pavilonis, a senior market strategist at RJO Futures, noted, “Gold had an explosive year… but I think that’s going to be short-lived and believe that gold is going to continue to move much higher.”
The rise in gold prices has been supported by easing monetary policies, strong central bank purchases, and heightened safe-haven demand.
Federal Reserve Outlook:
Traders are anticipating a 97% chance of a 25 basis point rate cut during the Fed’s meeting on December 17-18.
Attention will also be on comments from Fed Chair Jerome Powell regarding U.S. monetary policy for 2025, especially in light of President-elect Donald Trump’s proposed tariff plan, which could lead to increased inflation.
Economic Predictions:
Carsten Menke, an analyst at Julius Baer, remarked, “Generally speaking, we see a stronger U.S. economy next year, which should leave less room for rate cuts and should thus bring less tailwinds for gold.”
Central banks typically maintain higher interest rates to combat inflation, which raises the opportunity cost of holding non-yielding assets like gold.