Gold prices extended their gains on Monday, buoyed by a weaker-than-expected U.S. inflation report that rekindled hopes for further interest rate cuts by the Federal Reserve in the coming year.
Spot gold rose 0.4% to $2,631.89 per ounce by 0734 GMT, marking its third consecutive session of gains after hitting a low on Wednesday, its weakest level since November 18, following hawkish remarks from the Fed. U.S. gold futures, however, saw a modest dip, falling 0.1% to $2,645.80 per ounce.
“We’re entering the holiday period, and gold’s recent gains have largely been driven by short-covering that began last Friday, alongside some technical support,” said Ajay Kedia, Director at Kedia Commodities in Mumbai.
The rally in gold prices comes after a 1% rise on Friday, fueled by a weaker U.S. dollar and lower Treasury yields following a report showing a slowdown in inflation.
The data revealed that U.S. monthly inflation moderated in November, with the personal consumption expenditures (PCE) price index—considered the Fed’s preferred inflation measure—rising just 0.1% last month, compared to an unrevised 0.2% gain in October. On a year-over-year basis, the PCE index rose 2.4% in November, slightly above the 2.3% increase in October but below the expected 2.5% rise.
Following the data, Federal Reserve officials, including San Francisco Fed President Mary Daly, suggested that while the central bank is likely to resume easing in 2025, the process would be gradual, as the “recalibration phase” of monetary policy had largely concluded.
Higher interest rates generally reduce the appeal of non-yielding assets like gold.
Market analysts also pointed to broader geopolitical factors that could influence gold prices. “The potential volatility from the incoming presidency of Donald Trump, particularly the initial decrees he may issue, could add to market instability and be bullish for gold,” said Michael Langford, Chief Investment Officer at Scorpion Minerals.
In other precious metals, spot silver rose 1.1% to $29.84 per ounce, platinum gained 1.2% to $937.35, and palladium ticked up 0.2% to $922.68.
Meanwhile, data from COMEX revealed that gold speculators reduced their net long positions by 16,251 contracts to 203,937 in the week ending December 17.
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