Gold prices edge up as dollar weakens; Fed's rate outlook keeps traders cautious

Investing.com– Gold prices rose slightly in Asian trade on Thursday, extending their strong performance from 2024 as a weaker U.S. dollar provided support, while traders remained cautious given the U.S. Federal Reserve's projection of fewer interest rate cuts this year.

Spot Gold rose 0.3% to $2,632.82 per ounce, while Gold Futures expiring in February edged 0.1% higher to $2,644.47 an ounce by 23:06 ET (04:06 GMT). Gold ends 2024 with hefty gains, 2025 outlook dim on Fed rate outlook

The yellow metal jumped 27% in 2024, marking its best year since 2010, helped by the Fed’s outsized rate cuts in the previous year and geopolitical tensions around the globe.

When interest rates are low, the opportunity cost of holding gold decreases compared to interest-bearing assets like bonds or savings accounts. As a result, investors typically allocate more capital to gold as a store of value and a hedge against uncertainty.

While gold prices rose for most of the year, the Fed’s December meeting acted as a bump as it signaled only two more rate cuts in 2025

Gold prices had fallen sharply after the Fed meeting and have seen subdued movements since then, reflecting a cautious outlook for next year. Dollar weakens but remains near 2-yr high, other precious metals rise

The US Dollar Index fell 0.2% in Asia hours on Thursday but remained near a two-year high it reached last month. The US Dollar Index Futures were also higher.

With expectations of fewer rate cuts in 2025, the dollar has strengthened further, creating pressure on gold.

A stronger dollar weighs on gold prices as it makes the yellow metal more expensive for buyers using other currencies.

Other precious metals were higher on Tuesday. Platinum Futures rose 0.7% to $916.65 an ounce, while Silver Futures gained 1.6% to $29.715 an ounce. Copper rises on weaker dollar, Chinese PMI data

Among industrial metals, copper prices were higher on Thursday due to a weaker dollar, while a rise in monthly Chinese factory activity provided support.

Chinese manufacturing activity  grew in December but at a slower-than-anticipated pace, Caixin PMI data showed on Thursday.

The data suggests that the impact of recent stimulus measures is waning. Markets are holding out for more clarity on Beijing’s plans for stimulus measures in the coming year, where the government has signaled looser monetary policy in 2025.

Benchmark Copper Futures  on the London Metal Exchange rose 0.9% to $8,863.50 a ton, while February Copper Futures  gained 0.7% to $4.0492 a pound.

Source: Investing.com