Gold prices stay rangebound as rate cut hopes fade

Gold prices were stable in Asian trading on Friday, remaining within a recently established range, as market sentiment increasingly suggests that the Federal Reserve won’t initiate interest rate cuts early in 2024.

Gold prices showed some gains this week, rebounding from significant losses in the past two weeks. However, concerns about higher interest rates for an extended period constrained substantial increases in gold prices, alongside the relative strength of the dollar and Treasury yields.

Spot gold edged up 0.1% to $2,025.80 per ounce, while gold futures expiring in April increased 0.2% to $2,035.15 per ounce by 00:15 ET (05:15 GMT). Both instruments were poised to gain approximately 0.7% for the week following losses of up to 4% over the previous two weeks.

Bullion prices also stayed firmly within the $2,000 to $2,050 an ounce trading range observed for the majority of 2024.

Rate cut expectations fade amid hawkish Fed remarks, strong labor market

The gold outlook stayed dim as various signals led markets to further discount early Fed rate cuts.

Fed Governor Christopher Waller emphasized that the bank wasn’t rushing into early interest rate cuts due to persistent inflation. His remarks echoed those of other Fed officials earlier in the week and were consistent with the late-January meeting minutes.

Thursday’s labor report revealed a surprise drop in weekly jobless claims, indicating ongoing strength in the job market and reinforcing the Fed’s inclination to maintain higher interest rates.

Market sentiment, as reflected in the CME Fedwatch tool, indicates a near-complete dismissal of a May rate cut, with probabilities shifting to a higher likelihood of rates remaining unchanged in June, surging from 28.7% to 38.6% in just one day.

Traders also reduced the probability of a June rate cut to 49.7% from 53.6%. Meanwhile, Goldman Sachs analysts abandoned their expectation of a May rate cut.

The likelihood of higher rates for a longer period adds pressure on gold prices because higher rates increase the opportunity cost of purchasing bullion.

Despite this, gold outperformed its precious metal counterparts this week. Platinum futures stabilized at $906.50 an ounce, showing a decrease of 0.8% for the week, while silver futures dropped 0.3% to $22.707 an ounce, marking a 3.2% decline for the week.

Copper stabilizes, poised for weekly gains on optimism about China

Copper futures for March delivery dipped 0.2% to $3.8855 per pound, remaining stable among industrial metals.

Despite today’s slight decline, copper futures for March delivery recorded a 1.3% increase for the week, marking their second consecutive week of gains. The uptick was fueled by optimism that China, the largest importer of copper, would bolster its sluggish economic recovery.

Beijing unveiled a series of economic support measures this week, complemented by official data indicating a rise in spending and travel activity during the Lunar New Year holiday.

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