Gold retreats from record peak on tempered outlook for Fed rate cuts

Dec 4 – Gold fell more than 2% after hitting an all-time high on Monday, but zero-yield bullion’s retreat halted above USD 2,000 an ounce after traders trimmed bets for the first rate cut by the US Federal Reserve in early 2024.

Spot gold slipped 2.1% to USD 2,026.69 per ounce by 2:31 p.m. ET (1931 GMT). Prices swung in a wide USD 115 range but were finally headed for their worst day since February.

US gold futures settled down 2.3% at USD 2,042.20.

Early in the Asian session, gold hit a fresh record high of USD 2,135.4 on growing confidence about a rate cut following Fed Chair Jerome Powell’s comments on Friday.

“Despite the fact that we are closer to a Federal Reserve pivot, it may be premature to see these prices being sustained… this market is getting a little tired,” said Bart Melek, head of commodity strategies at TD Securities.

“We’re going to need more catalysts, and they will come in the form of weak economic data.”

The Fed appears on track to end the year with interest rate hikes as a thing of the past, but with a coming challenge over when and how to signal a turn to rate cuts.

Pressuring gold, the dollar index rose 0.5%, making bullion more expensive for other currency holders. US 10-year Treasury yields also ticked higher.

Traders saw a 57% chance for a rate cut by March, down from 63% on Friday, CME’s FedWatch Tool showed. Lower rates reduce the opportunity cost of holding bullion.

Data last week pointed out cooling inflationary pressures and a gradually easing labor market reinforcing the notion of an early rate cut.

Traders are awaiting Friday’s release of US non-farm payrolls data, which could help further gauge the interest rate outlook.

Silver slipped 3.6% to USD 24.50 per ounce, set for its worst day in two months after hitting a seven-month peak earlier in the session.

Palladium fell 1.7% to USD 917.31, and platinum dipped 2.8% to USD 972.67.

(Reporting by Anushree Mukherjee in Bengaluru; Editing by Shailesh Kuber and Maju Samuel)