Gold leaps above US$2,000 as dollar weakens on Fed pause bets

Gold rose over the key US$2,000 level on Friday (Nov 24), logging its second consecutive weekly gain, see-sawing against a weaker U.S. dollar on bets that the U.S. Federal Reserve is done with its interest rate-hiking cycle.

Spot gold was up 0.5 per cent at US$2,001.97 per ounce by 2.30 pm ET (7.30 pm GMT), and has risen over 1 per cent so far this week. US gold futures settled 0.5 per cent higher at US$2,003.00.

The dollar index has been deteriorating due to the weaker data coming out this week, which should shift the Fed to a more dovish pivot and then that could be a tailwind for gold in 2024, said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

The dollar index fell 0.4 per cent and was on track for a second weekly drop on growing expectations the Fed could start cutting interest rates by May next year.

“After all, the latest economic data have been rather disappointing,” Commerzbank said in a note.

Commerzbank expects the first rate cut to be implemented in the middle of next year, so only then is the price of gold likely to climb lastingly above US$2,000.

Traders widely expect the Fed to leave rates unchanged in December, while pricing in about a 64 per cent chance of a cut as early as May, according to CME’s FedWatch Tool.

“We don’t see either a significant move higher or lower in the short run into next year and it becomes more certain that the U.S. central bank is willing to cut interest rates and probably cut interest rates significantly before we reach the 2 per cent inflation target,” said Bart Melek, head of commodity strategies at TD Securities.

Lower interest rates diminish the opportunity cost of holding non-interest-bearing gold.

SEE ALSO

Gold steadies; poised for second weekly gain on weaker dollar

Gold ticks higher as weaker US dollar, yields lend support

Spot silver gained 2.7 per cent to a 12-week high at US$24.3 per ounce. Platinum rose 1.6 per cent to US$930.61 and palladium was up 2.2 per cent to US$1,068.83 per ounce, both heading for their second weekly gain. REUTERS