During Wednesday’s trading session, the XAU/USD Gold Spot price experienced a notable surge, reaching $2,070 and marking a gain of 0.50%. This upward movement was primarily driven by increasing speculation of dovish expectations from the Federal Reserve (Fed). The persistently low yields, stuck at multi-month lows, further supported the advance of the precious yellow metal.
The considerable drop in the US Personal Consumption Expenditures (PCE) price index for November has fueled optimism regarding potential initial rate cuts by the Federal Reserve in the coming year. This follows a series of slowing Consumer Price Index (CPI) readings and Fed officials’ projections of a 75 basis points easing in 2024, contributing to pressure on the US Dollar and bond yields. According to the CME FedWatch Tool, markets are indicating a 15% probability of a cut in January, with expectations of 50 basis points of easing between March and May.
Consequently, US bond yields are experiencing a decline, reaching multi-month lows. The 2-year rate stands at 4.23%, its lowest since May, while the 5 and 10-year yields are trading at 3.78% each, marking their lowest levels since June and July, respectively. This downward trend has a positive impact on non-yielding metals, as bond yields are often considered the opportunity cost of holding such assets.
Looking ahead, Thursday’s release of weekly Jobless Claims figures in the US is anticipated to contribute to increased volatility in both the USD and bond market price dynamics. Investors will closely monitor these developments as they continue to assess the potential implications for the precious metals market.
