Gold prices slump to worst week since 2021 as rate-cut bets fade

Gold prices on Friday slumped to their worst week since 2021, as the Federal Reserve signalled no need for speed on rate cuts, pushing Treasury yields and the dollar higher. 

The yellow metal was also battered by a risk-on rally in the wake of a Donald Trump victory in the 2024 presidential election. Markets were also uncertain over the outlook for interest rates under Trump. 

Spot gold fell 0.1% to $2,561.81 an ounce, while gold futures expiring in December fell 0.3% to $2,566.35 an ounce.  Gold set to lose over 4% this week 

Spot gold was trading down about more than 4% this week, its worst performance since  June 2021. The yellow metal had initially tumbled from record highs after Trump’s election victory ramped up risk appetite last week.

Losses deepened this week as the dollar shot up to one-year highs amid increasing uncertainty over the near-term outlook for interest rates.

U.S. consumer and producer inflation read sticky for October, while comments from Federal Reserve officials suggested the central bank was more cautious over cutting interest rates further. 

Fed Chair Jerome Powell said resilience in the U.S. economy meant the central bank could take its time to cut rates further. His comments saw traders pare expectations for a December rate cut.

Traders were seen pricing in a 61% chance for a 25 basis point rate cut in December, down from an 85.7% chance seen on Thursday. Traders also saw a 39% chance rates will remain unchanged, CME Fedwatch showed. 

The prospect of higher-for-longer rates bodes poorly for gold and other precious metals. Expectations of more inflationary policies under Trump also saw traders bracing for higher long term rates.

Platinum futures rose 0.2% to $945.95 an ounce, while silver futures fell 0.8% to $30.323 an ounce on Friday. Both metals were also nursing steep losses this week.  Copper prices  in steep weekly loss

Among industrial metals, copper prices gave up early-day gains following mixed economic readings from top importer China. But prices of the red metal were nursing steep losses for the week after stimulus measures from the country largely underwhelmed.

Benchmark copper futures on the London Metal Exchange fell 0.6% to $8,975.00 a ton, while December copper futures fell 0.6% to $4.0628 a pound. Both contracts were down between 4% and 5% this week, their worst drop since early-July. 

Data on Friday showed little improvement in the Chinese economy, as industrial production grew less than expected in October, as did fixed asset investment .

But retail sales were a bright spot, rising more than expected on the Golden Week holiday. 

Source: Investing.com