Bengaluru — Gold prices were set on Friday for their best annual performance in three years amid mounting expectations of US interest rate cuts early next year with the Ukraine war and Middle East tension lifting safe-haven demand.
Spot gold was up 0.3% at $2,071.72 an ounce at 8.29am GMT. It has risen about 14% so far this year, heading for its biggest annual gain since 2020. US gold futures fell 0.1% to $2,081.10 an ounce.
“Gold prices seem to end the year near current levels, while the main driver next year would be the timing and depth of Fed interest rate cuts,” said Ilya Spivak, head of global macro at Tastylive.
Bets for rate cuts from the Federal Reserve firmed in the wake of cooler inflation data, with traders now pricing in an 88% chance of monetary policy easing in March, according to the CME FedWatch tool.
Lower interest rates decrease the opportunity cost of holding nonyielding gold.
The dollar index fell 0.1% on Friday and was poised for its worst annual in three years, boosting gold’s appeal for other currency holders. Yields on 10-year Treasury notes languished near their lowest level since July at 3.8530%.
“Refinancing risk is a potent threat to financial stability. If that shakes credit markets and forces the Fed to ramp up stimulus in a hurry, gold will accelerate higher,” said Spivak.
Spot silver fell 0.4% to $23.83 an ounce, but looked set to the end the year largely flat.
Platinum rose 0.1% to $1,003.58 per ounce. Palladium fell 0.8% to $1,123.75. Both autocatalytic metals were on track to have fallen 37% over the year, its biggest drop since 2008.
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