By Brijesh Patel
(Reuters) – Gold prices were set on Friday for a weekly gain, as prospects of the U.S. Federal Reserve lowering borrowing costs next year dented the dollar and Treasury yields, boosting demand for the safe-haven asset.
Spot gold held its ground at $2,035.93 per ounce, as of 0536 GMT, and has risen 1.6% so far in the week. U.S. gold futures rose 0.3% to $2,050.30.
“The prospect of (rate) cuts is very bullish for gold – lower yields boost the attractiveness of gold and if the cuts are coming because of a looming recession, then that just sweetens things for gold,” said Kyle Rodda, a financial market analyst at Capital.com.
“In the very near-term, gold is at risk from a reversal in yields – bonds are a bit overbought technically. In the long-run, the rate-cut story augurs very well for gold.”
The Fed left interest rates unchanged on Wednesday and Chair Jerome Powell said the historic tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view”.
Fed officials estimated 75 basis points (bps) of rate cuts in 2024, with 2.4% inflation at the end of next year. Markets are now pricing in around a 75% chance of a rate cut in March, according to CME FedWatch tool.
Lower U.S. interest rates put pressure on the dollar and bond yields, and increase the appeal of non-yielding bullion.
The dollar was headed for a weekly drop after hitting a four-month low on Thursday, making gold less expensive for other currency holders. [USD/]
Benchmark U.S. 10-year bond yield, meanwhile, hovered near its lowest level since July. [US/]
Silver eased 0.2% to $24.08 per ounce, while platinum fell 0.2% to $956.15. However, both metals were on track for weekly gains.
Palladium slipped 1% to $1,091.28, but was headed for its best week since March 2022, up about 15% so far this week.
(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich and Subhranshu Sahu)
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