Gold prices remain rangebound as early rate cut bets wane

Investing.com-- Gold prices moved little in Asian trade on Friday and remained well within a recently-established trading range amid increasing conviction that the Federal Reserve will not cut interest rates early in 2024.

While the yellow metal was headed for some gains this week, they were largely a recovery from steep losses seen in the last two weeks. Concerns over higher-for-longer interest rates continued to limit any major upside in gold prices, as did relative strength in the dollar and Treasury yields.  

Spot gold rose 0.1% to $2,025.80 an ounce, while gold futures expiring in April rose 0.2% to $2,035.15 an ounce by 00:15 ET (05:15 GMT). Both instruments were set to add about 0.7% this week after losing as much as 4% in the past two weeks. 

Bullion prices also remained squarely within the $2,000 to $2,050 an ounce trading range seen for most of 2024 so far. 

Early rate cut bets wane amid hawkish Fedspeak, labor market strength 

The outlook for gold remained dull as a slew of signals saw markets further price out early rate cuts by the Fed.

Fed Governor Christopher Waller said the bank was in no hurry to cut interest rates early, given that inflation remained sticky. His comments came after several other Fed officials offered similar signals this week, as did the minutes of the Feds’ late-January meeting. 

Labor data on Thursday showed weekly jobless claims unexpectedly fell, indicating continued resilience in the labor market, which also gives the Fed more impetus to keep rates higher.

The CME Fedwatch tool now showed markets almost entirely pricing out the chance of a May rate cut, while chances for a hold in June jumped to 38.6% from 28.7% seen a day prior. 

Traders also priced down the chance of a June cut to 49.7% from 53.6%, while Goldman Sachs analysts said they no longer expected a cut in May.

The prospect of higher for longer rates presents more pressure on gold prices, given that higher rates push up the opportunity cost of buying bullion.

Still, the gold performed better than its precious metal peers this week. Platinum futures steadied at $906.50 an ounce, and were down 0.8% this week, while silver futures fell 0.3% to $22.707 an ounce and were down 3.2% this week. 

Copper steadies, set for weekly gains on China hopes

Among industrial metals, copper futures expiring in March fell 0.2% to $3.8855 a pound.

But they were up 1.3% this week, their second consecutive week of gains, amid some hopes that top importer China will spruce up a slowing economic recovery.

Beijing announced a string of economically supportive measures this week, while official data also showed an increase in spending and travel during the Lunar New Year holiday.