Gold rises as Fed rate-cut prospects dent dollar, bond yields

Dec 14 – Gold prices extended gains to a one-week high on Thursday after the US Federal Reserve flagged an end to its tightening cycle and signaled lower borrowing costs in 2024, sending the dollar and Treasury yields tumbling.

Spot gold was up 0.2% at USD 2,031.28 per ounce, as of 0130 GMT, after rising 2.4% on Wednesday. US gold futures jumped 2.4% to USD 2,045.50.

“The Fed’s dovish pivot stuck a rocket under gold prices, which used USD 1,980 support as a springboard to break its USD 2,000 per ounce glass ceiling,” said Matt Simpson, a senior analyst at City Index.

“This certainly places the US dollar in a weak spot heading into the back of the year, a month which tends to generate bearish returns for USD and benefit gold.”

The Fed kept interest rates steady for the third meeting in a row, as was widely expected. A near unanimous 17 of 19 Fed officials project the policy rate will be lower by the end of 2024 than it is now.

Meanwhile, Fed Chair Jerome Powell said the US central bank was likely done raising rates, but kept open the option to act again if needed.

The dollar fell to a two-week low against its rivals, making gold less expensive for other currency holders, while the US benchmark 10-year yield dropped to its lowest level since August.

Markets are now pricing in around a 73% chance of a rate cut in March from the Fed, according to CME FedWatch tool.

Lower interest rates tend to support non-interest-bearing bullion.

Market participants now await other central bank decisions, including the European Central Bank and the Bank of England later in the day.

Spot silver rose 0.4% to USD 23.83 per ounce, while platinum gained 0.2% to USD 936.15 and palladium climbed 0.6% to USD 998.64.

((Brijesh.Patel1@thomsonreuters.com; Within U.S. +1 651 848 5832, Outside U.S. +91 9590227221; Reuters Messaging: Brijesh.Patel1.thomsonreuters.com@reuters.net))