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Gold rises as dollar retreats on Fed rate cut prospects

Gold gains

Spot gold was 0.7 per cent higher at $2,043.79 per ounce, eyeing its best session in six and U.S. gold futures settled up 0.2 per cent at $2,051.30

Gold prices rose on Thursday as the dollar pulled back after U.S. economic data fuelled expectations the Fed would cut interest rates in March next year.

Spot gold was 0.7 per cent higher at $2,043.79 per ounce by 1955 GMT, eyeing its best session in six. U.S. gold futures settled up 0.2 per cent at $2,051.30.

Data showed U.S. GDP rose at a 4.9 per cent annualized rate last quarter, revised down from the previously reported 5.2 per cent pace, while weekly jobless claims increased slightly.

GDP data came in a bit weaker and gold rose. Market is craving the Fed pivot, said Tai Wong, a New York-based independent metals trader.

The market expects an 83 per cent possibility of a Fed rate cut by March, compared with 79 per cent before the data, showed the CME FedWatch tool.

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

The U.S. dollar dropped 0.5 per cent and 10-year Treasury yields stayed near a five-month low.

The Fed’s dovish stance has caused markets to price in a number of rate cuts next year. Nevertheless, some Fed officials have spoken out against impending rate cuts.

Market focus has now shifted to the U.S. core 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 added 0.9 per cent to $24.33 per ounce, touching a 16-day high.

Platinum increased 0.4 per cent to $962.82, near a 16-week peak hit last session, and palladium was 1.3 per cent higher at $1,211.71.

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