Gold set for weekly drop on tempered rate-cut view

GOLD prices were set on Friday (Jan 19) for their worst week in more than a month, as the US dollar and Treasury yields strengthened after US central bankers pushed back against expectations of early rate cuts amid signs of resilience in the economy.

Spot gold edged 0.1 per cent higher to US$2,023.52 per ounce by 0158 GMT. However, it has fallen 1.2 per cent so far in the week.

US gold futures rose 0.2 per cent to US$2,025.40.

The US dollar index was down 0.2 per cent for the day but up nearly 1 per cent so far this week. A stronger US dollar makes greenback-denominated gold more expensive for foreign currency holders.

Yields on the benchmark US 10-year Treasury notes touched a fresh five-week high of 4.1632 per cent.

Data released on Thursday showed jobless claims in the US fell last week to the lowest level since late 2022, suggesting job growth likely remained solid in January.

Atlanta Federal Reserve president Raphael Bostic said he was open to lower rates sooner than he had anticipated, depending on how quickly inflation falls, but that the baseline was for rate cuts to start in the third quarter.

Markets were betting on 139 basis points of Fed rate cuts this year, down from 150 bps a week earlier, according to LSEG’s interest rate probability app, IRPR.

The odds of a Fed rate cut in March have dropped to 54 per cent from about 71 per cent last week, according to IRPR.

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Gold flat after price slump as US Fed comment pushes back rate-cut hopes

Lower interest rates decrease the opportunity cost of holding bullion.

The European Central Bank warned in minutes from its most recent meeting that it was far too soon to discuss policy easing.

Spot silver rose 0.1 per cent to US$22.76 per ounce, platinum climbed 0.2 per cent to US$908.65, and palladium gained 0.8 per cent to US$945.24. REUTERS