Gold Prices Surpass $2,060 as Soft Inflation Signals Rate Cuts in 2024

© Reuters.– Gold prices rose in light Asian trading on Tuesday, breaking out of a trading range seen through most of December as soft U.S. inflation data fueled further bets on an early rate cut in 2024.

The yellow metal saw strong gains in recent sessions following weaker-than-expected data on the Federal Reserve’s preferred inflation gauge.

The data, which followed dovish signals from the Fed during its last meeting in 2023, raised hopes that the central bank could start cutting interest rates as early as March 2024.

The notion presented a strong outlook for gold, given that high interest rates raise the opportunity cost of investing in the precious metal.

rose 0.5% to $2,064.16 an ounce, while February futures rose 0.3% to $2,075.10 an ounce by 11:58 p.m. ET (00:58 GMT).

Spot gold also broke out of the $2,000-$2,050 trading range established for most of December and was now trading less than $100 off a record high of over $2,130 an ounce earlier in the month.

Bets on a March rate cut boost after modest PCE inflation

Softer-than-expected PCE inflation data released on Friday showed traders increased bets that the central bank will start cutting interest rates as early as March 2024.

showed traders a more than 70% chance of a 25 basis point cut in March 2024. Goldman Sachs said the central bank would follow up the March cut with two more cuts in the first half of 2024 and also cut rates twice more later in the year.

But a number of Fed officials have warned that bets on an early rate cut by the central bank may be overly optimistic.

Still, it fell to a near five-month low on Tuesday while falling. Gold benefited from this trade.

The yellow metal may also benefit from worsening global economic conditions next year, as major economies feel the effects of tight monetary policy.

Copper prices are stable, the outlook for 2024 seems optimistic

Among industrial metals, copper prices rose in Asian trade on Tuesday, extending a string of recent gains amid some optimism about the red metal’s 2024 outlook.

rose 0.4% to $3.9153 a pound by the end of March.

While the recent drop in the dollar has been a key point of support for the red metal, expectations of improved demand in 2024 have also helped copper, especially amid growing demand for electric vehicles worldwide. The red metal is a key component of batteries and electronics.

Copper supplies are also expected to tighten due to the closure of large mines in Panama and Peru.