Gold prices dipped but were still poised for a weekly increase, as the United States Federal Reserve’s December 2024 policy meeting drew near, with expectations of a third interest rate reduction this year.
The spot price of gold decreased by 0.4% to USD 2,671.39 per ounce, as the US dollar neared its highest point in over two weeks.
US gold futures also experienced a drop of 0.6% to USD 2,692.40. However, gold has gained more than 1% in the middle week of December 2024 due to a phase of profit-taking that started when prices reached a five-week high.
“We have reached the time of year when convictions are low, and positions are being held on a short leash, meaning any price reversal – in both directions – will quickly be met with position-squaring,” Ole Hansen, head of commodity strategy at Saxo Bank said.
According to Hansen, gold will likely consolidate through the end of the year before starting to rise again in 2025 and possibly hitting the USD 3,000 mark.
Now, traders’ attention is on the Fed’s December 17-18 meeting, with the CME Group’s FedWatch Tool indicating that there is a 97% chance of a 25 basis point rate cut.
Given that inflation is still higher than the Fed’s 2% annual target, Fed Chair Jerome Powell’s remarks will be closely examined to assess the outlook for 2025.
“Gold prices at USD 3,000+ or USD 2,500 is contingent on whether the Fed is ahead or behind the Trumpflation curve; we expect them to be behind, leading to falling real rates and a softer US dollar in the latter half of the year,” Nicky Shiels, head of metals strategy at MKS PAMP SA, said.
Spot silver dropped 0.05% to USD 30.80 an ounce.
Palladium increased 0.3% to USD 972, while platinum increased 0.3% to USD 933. The weekly gains were planned for both metals.