📈 69% of S&P 500 stocks beating the index - a historic record! Pick the best ones with AI.See top stocks

Gold prices steady as early rate-cut hopes drive strong gains

Published 12/27/2023, 01:37 AM
US500
-
GC
-
HG
-

Investing.com-- Gold prices kept to a tight range in Asian trade on Wednesday after rising optimism over early interest rate cuts by the Federal Reserve drove a strong melt-up in prices through December. 

The yellow metal blew past key levels in recent sessions, and was now trading less than $100 below a record high hit at the beginning of the month. Gold’s recent rally was triggered by the Fed signaling it was done raising interest rates, and that it will trim lending rates in 2024. 

But markets bet that the Fed will cut interest rates by as soon as March 2024, especially as recent data showed sustained cooling in U.S. inflation. 

Spot gold steadied at $2,064.84 an ounce, while gold futures expiring in February rose 0.3% to $2,075.85 an ounce by 01:14 ET (06:14 GMT). 

Gold set for strong gains in 2023 on rate cut hopes 

Gains in December put gold prices on course to rise between 12% to 14% in 2023.

But the yellow metal still lagged most risk-driven assets, particularly stocks, given that U.S. interest rates remained high. By comparison, the S&P 500 was set to add about 24% in 2023. 

Still, the yellow metal stands to benefit further in 2024, especially as U.S. interest rates decrease and as global economic conditions deteriorate. While the U.S. economy has remained somewhat resilient, other parts of the world- such as the euro zone and China- are grappling with a sustained slowdown in growth.

The Fed is widely expected to trim interest rates between three to five times in 2024, with markets betting that the first of the expected rate cuts could come by as soon as March 2024

High interest rates push up the opportunity cost of investing in gold- a trend that had limited any major gains in the yellow metal through most of 2023.

Increased safe haven demand- amid signs of a potential escalation in the Israel-Hamas war- could also potentially increase safe haven demand for the yellow metal. 

Copper prices advance, set for mild gains in 2023

Among industrial metals, copper prices rose on Wednesday, extending recent gains as weakness in the dollar buoyed most commodity prices.

Copper futures expiring March rose 0.5% to $3.9223 a pound. 

Despite logging a strong rebound in December, copper prices were still set for only mild gains in 2023- about 3%- as concerns over an economic slowdown in top importer China battered prices.

Copper prices had fallen to as low as $3.5195 a pound earlier this year.

But the red metal is potentially set for a strong rebound in 2024. Increasing demand for electric vehicles, coupled with a global push into green energy, is expected to ramp up consumption of the red metal, which is a key component in battery and electric technology. 

Supplies are also expected to tighten, with major mine closures in Peru and Panama. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.