Gold Prices Struggle Amid Hawkish Fed Outlook and Strong Dollar

Gold prices held near a one-month low in Asian trade on Friday, heading for their third consecutive weekly loss as the Federal Reserve’s slower-than-expected rate cut projections for 2025 weighed on investor sentiment.

Gold Performance

• Spot gold edged up 0.1% to $2,596.82 per ounce, while
• Gold futures for February delivery rose 0.1% to $2,610.30 an ounce.

For the week, spot prices were down nearly 2%, pressured by a strengthening dollar, which hit a one-year high earlier this week.

Factors Weighing on Gold

1. Federal Reserve Policy:
   • The Fed lowered rates by 25 basis points but projected only two more cuts in 2025, compared to market expectations of four.
   • A slower rate cut path boosts the dollar and bond yields, reducing gold’s appeal as a non-yielding asset.
2. U.S. Economic Resilience:
   • GDP Growth: Revised Q3 data showed the U.S. economy grew faster than previously estimated, signaling strong economic momentum.
   • Jobless Claims: Initial claims fell more than expected last week, hinting at a gradual labor market slowdown, not a steep decline.
3. Safe-Haven Demand:
   • With the U.S. economy displaying resilience, demand for safe-haven assets like gold has waned.

Investors now await the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, for further clues on economic conditions and monetary policy direction.

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Other Precious Metals

• Platinum futures fell 0.4% to $921.75 an ounce.
• Silver futures dropped 0.4% to $29.302 an ounce.

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Industrial Metals: Copper Gains on U.S. Data, China Stimulus Hopes

Copper prices rebounded after Thursday’s slump, supported by:

• Strong U.S. Data: Expectations of steady demand due to robust economic conditions.
• China Stimulus Hopes: Reports suggest Beijing plans to increase fiscal spending in 2024, boosting demand for industrial metals.
• London Metal Exchange Benchmark Copper rose 0.4% to $8,925.30 per ton.
• One-month Copper Futures were steady at $4.0855 per pound.

China’s central bank left its loan prime rate unchanged, but speculation about fiscal stimulus helped buoy copper sentiment despite limited impact from looser monetary policy over the past two years.

Outlook

Gold faces continued headwinds from the Fed’s hawkish stance, the strong dollar, and resilient U.S. economic data. Meanwhile, industrial metals, particularly copper, may see more support if China’s fiscal stimulus plans materialize, providing some optimism in the broader commodity market.