Gold prices fell near a one-month low this week as the Federal Reserve's forecast of fewer interest rate cuts in 2025 weighed on investor sentiment. The dollar's strength and robust U.S. economic data further pressured gold prices.
Gold prices stabilized near a one-month low in Asian trade on Friday and were poised for weekly losses after the U.S. Federal Reserve 's forecast of fewer than expected interest rate cuts in 2025 unsettled investors. The Fed lowered interest rates by 25 basis points as anticipated, but signaled it will adopt a slower rate cut trajectory, with just two more cuts in 2025. Markets had anticipated four cuts prior to the decision.
Spot prices were down almost 2% this week, experiencing pressure from a robust dollar. The greenback surged to an over one-year high this week. Gold prices reached a one-month low on Wednesday, following the Fed's indication that rates will remain elevated for an extended period subsequent to Wednesday's cut. Higher interest rates exert downward pressure on gold as the opportunity cost of holding gold rises, rendering it less appealing compared to interest-bearing assets like bonds. Data released on Thursday further solidified the Fed's outlook, as the U.S. economy expanded at a faster pace than previously estimated in the third quarter. Continued resilience of the U.S. economy can decrease the demand for safe-haven assets, further dampening bullion's prospects. Among industrial metals, copper prices rebounded after a decline on Thursday as strong U.S. economic data kindled some optimism that copper demand will improve. Hopes for increased fiscal spending in China also aided the red metal, as recent reports suggested Beijing will intensify fiscal stimulus in the coming year. The People's Bank of China kept its benchmark interest rate unchanged at 3.85%
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