Gold prices pinned below $2,000 as Fed meeting looms, outlook uncertain

Investing.com-- Gold prices hovered below key levels on Wednesday as markets grew wary of non-yielding assets before the conclusion of the Federal Reserve’s final meeting for the year.

Recent signs of strength in the labor market and sticky U.S. inflation dented expectations that the central bank will trim interest rates earlier in 2024. While the Fed is still expected to keep rates on hold later on Wednesday, its outlook for 2024 remains uncertain.

Uncertainty over the Fed had spurred wild swings in gold prices this month, with the yellow metal briefly hitting record highs of over $2,100 an ounce before seeing a heavy degree of capitulation.

Recent losses in the yellow metal also saw it lose the coveted $2,000 an ounce level, especially as the dollar regained its footing in anticipation of the Fed.

Spot gold steadied at $1,979.06 an ounce, while gold futures expiring February were flat at $1,993.70 an ounce by 00:26 ET (05:26 GMT).

Fed set to hold rates, but markets split over 2024 rate cuts

The central bank is widely expected to keep rates on hold at the conclusion of its final meeting for 2023 later in the day.

But any signals from Fed Chair Jerome Powell on the path of rates through 2024 will be in close focus, especially as markets feared a potentially hawkish outlook from the central bank chief.

Powell has largely maintained his higher-for-longer rhetoric on rates, but has acknowledged major progress against inflation this year. Still, inflation remained comfortably above the Fed’s 2% annual target in November.

Any hawkish signals from the Fed are likely to further unsettle gold markets, especially as investors grew less convinced that a rate hike was due by March 2024.

Fed funds futures prices show a 43% chance of a rate cut in March, down sharply from the 60% being priced in last week. Higher rates bode poorly for gold, given that they push up the opportunity cost of investing in bullion.

Copper dips as China woes persist

Among industrial metals, copper prices continued their descent amid little optimism over top importer China.

Copper futures expiring March fell 0.4% to $3.7782 a pound.

Signs of worsening disinflation in China saw copper log heavy losses this week, as markets feared that worsening economic conditions in the world’s largest copper importer will dent demand.

While Chinese officials promised more stimulus measures to support growth, copper prices and broader markets took little relief from their comments, given that Beijing has largely dragged its feet in rolling out more supportive measures this year.

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