Gold prices surge as dollar hits 4-mth low; Inflation data awaited

Investing.com-- Gold prices rose on Friday, extending gains from the prior session after a mild downgrade to third-quarter U.S. GDP and soft labor market data put the dollar at four-month lows.

Focus was now squarely on key inflation data due later in the day for more affirmation that the Federal Reserve will cut interest rates in 2024. 

Friday’s gains saw spot gold come close to breaking out of a $2,000-$2,050 an ounce trading range established over the past week, as gold bulls welcomed signs of a cooling U.S. economy.

Spot gold rose 0.2% to $2,049.20 an ounce, while gold futures expiring February rose 0.5% to $2,060.65 an ounce by 00:16 ET (05:16 GMT). Both instruments were at over two-week highs, and were also set for an over 1% gain this week.

Dollar sinks after GDP, unemployment readings; PCE inflation in sight 

Gold’s gains came after the dollar hit more than four-month lows on Thursday. 

A revised reading on third-quarter GDP showed the U.S. economy grew slightly less than initially expected. The reading still showed the U.S. economy growing far more than its peers in the developed world. 

But a smaller-than-expected rise in weekly jobless claims ramped up hopes for a cooling labor market. 

Cooling economic growth points to softer inflation and labor activity- two main points of consideration for the Fed in trimming interest rates. PCE price index data- the Fed’s preferred inflation gauge- is due later on Friday.

The reading is still expected to remain well above the Fed’s 2% annual target- a trend that could see the central bank push any interest rates later into 2024. 

Expectations of rate cuts by as soon as March 2024 drove strong gains in gold over the past week, although several Fed officials warned that bets on early monetary easing by the Fed were overly optimistic.

Still, the yellow metal was now trading less than $100 away from a record high hit earlier in December, as it benefited from the prospect of lower interest rates. High rates push up the opportunity cost of investing in gold. 

Copper steadies near 4-mth high on 2024 prospects 

Among industrial metals, copper prices moved little on Friday, but hovered near their highest levels since early-August. 

Copper futures expiring March were flat at $3.9253 a pound, and were set for a 0.9% weekly gain- their second straight week in black.

Prices of the red metal were boosted by the prospect of lower interest rates in 2024, which is expected to boost global economic activity and shore up copper demand. 

An increasing push into green energy and electric vehicles is also expected to boost demand, while copper supplies are expected to tighten amid mine closures in Peru and Panama.