Gold prices stabilized near a one-month low during Asian trading on Friday, heading for weekly losses after the U.S. Federal Reserve’s projection of fewer-than-expected interest rate cuts in 2025 unsettled investors.
While the Fed reduced interest rates by 25 basis points as anticipated, it signaled a slower pace for future cuts, forecasting only two additional reductions next year. This was a stark contrast to market expectations of four cuts.
As of 22:35 ET (03:35 GMT), spot gold inched up to $2,596.82 per ounce, while gold futures for February delivery gained 0.1%, reaching $2,610.30 per ounce. However, spot prices were down nearly 2% for the week, pressured by a stronger U.S. dollar, which surged to its highest level in over a year.
Hawkish Fed Outlook Pressures Gold Prices
Gold prices dropped to a one-month low on Wednesday following the Fed’s decision and its indication that interest rates would remain elevated for a longer period. Higher rates generally reduce the appeal of gold, as the opportunity cost of holding the non-yielding metal rises, making assets like bonds more attractive.
Traders have now adjusted their expectations, pricing in only one quarter-point rate cut in 2025 amid ongoing economic strength and persistent inflation. This outlook was reinforced by U.S. GDP data released Thursday, which showed the economy grew at a faster pace than previously estimated in the third quarter.
Additional data revealed that initial jobless claims fell more than expected last week, signaling a gradual slowdown in the labor market. The continued resilience of the U.S. economy could reduce demand for safe-haven assets like gold, further dampening the precious metal’s appeal.
Investors are also awaiting the release of the Personal Consumption Expenditures (PCE) price index data, the Fed’s preferred inflation gauge, to gain further insights into the U.S. economic outlook.
Other Precious Metals Struggle
Other precious metals also faced downward pressure on Friday. Platinum futures dropped 0.4% to $921.75 per ounce, while silver futures fell 0.4% to $29.302 per ounce.
Copper Prices Rebound on Strong U.S. Data, Hopes for Chinese Stimulus
In contrast, industrial metals saw some recovery, with copper prices rebounding after a dip on Thursday. Strong U.S. economic data renewed hopes for improved demand for copper, while expectations of increased fiscal spending in China provided additional support. Recent reports have suggested that Beijing plans to ramp up fiscal stimulus in the coming year.
On the London Metal Exchange, benchmark copper futures rose 0.4% to $8,925.30 per ton, while one-month copper futures remained steady at $4.0855 per pound.
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