Gold climbs on hopes for sizeable Fed rate cuts this year

GOLD prices rose on Thursday (Feb 1) as investors held on to hopes that the Federal Reserve would cut interest rates by a significant amount this year, even after the US central bank pushed back against the idea of a cut in March.

Spot gold rose 0.4 per cent to US$2,045.65 per ounce by 0213 GMT. On Wednesday, bullion touched a more than two-week high of US$2,055.89 before paring gains to end the session 0.1 per cent higher.

US gold futures fell 0.2 per cent to US$2,063.20.

The Fed left interest rates unchanged and knocked down the idea that the US central bank could cut rates in the spring.

The Fed dropped a longstanding reference to possible further hikes in borrowing costs.

Futures pared bets for a rate cut in March to 35.5 per cent from 90 per cent at 2023-end, but increased chances of a reduction in May to 96 per cent, according to LSEG’s interest rate probability app IRPR.

Traders are pricing in about 142 basis points (bps) of Fed rate cuts for this year, up from bets of about 130 bps of reductions on Wednesday morning.

China’s factory activity expanded in January, helping lift business confidence to a nine-month high, a private-sector survey showed.

Data showed US private payrolls rose far less than expected in January. Investors are now awaiting Friday’s jobs report for January, which is expected to show that employers added 180,000 jobs last month.

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Investors also took stock of troubles at regional US lender New York Community Bancorp after it cut its dividend and posted a surprise loss, renewing fears over the health of similar lenders.

The US dollar index rose 0.2 per cent, while yields on benchmark US Treasury notes languished near their lowest in more than two weeks at 3.9426 per cent.

Spot silver rose 0.3 per cent to US$22.97 per ounce, platinum gained 0.2 per cent to US$919.95, and palladium climbed 0.4 per cent to US$980.34. REUTERS