Gold is approaching a 3-week peak amid bets on lower interest rates

Gold prices surged on Friday to their highest levels in about three weeks as expectations grew that the Federal Reserve would cut interest rates early in the year. This move pushed the dollar and bond yields lower in anticipation of the upcoming US inflation data.

As of 0513 GMT, spot gold increased by 0.2 percent to $2,048.99 per ounce, reaching its highest levels since December 4 during the session. Gold has witnessed a 1.5 percent rise throughout the week.

US gold futures also saw a 0.5 percent increase, reaching $2,060.50 per ounce.

The dollar index approached its lowest level in five months, making gold more attractive to holders of other currencies. Concurrently, US 10-year bond yields hovered near their lowest level since July.

Traders, as indicated by the CME Group’s FeedWatch tool, anticipate an 83 percent probability of interest rate cuts by March. Lower interest rates diminish the opportunity cost of holding non-yielding gold.

All attention is now focused on the November Core PCE report, the Federal Reserve’s preferred measure of inflation, to gain further insights into the outlook for US interest rates. The report is scheduled for release at 1330 GMT, with traders expecting the index to rise by 3.3 percent on an annual basis, compared to 3.5 percent in October.

In terms of other precious metals, silver experienced a 0.1 percent decline, settling at $24.38 per ounce. Platinum also fell by 0.1 percent to $962.28, and palladium dropped by 0.6 percent to $1,206.12. Despite these declines, all three metals are heading for gains for the second consecutive week.