Gold prices remained stable on Friday, with market participants awaiting the release of U.S. non-farm payrolls data, which could provide insights into the Federal Reserve's timeline for potential rate reductions. Despite a slight decline, gold is on track for its largest weekly gain since December.
As of 1130 GMT, spot gold gained slightly by 0.02% to $2,055.14 per ounce, while the U.S. gold futures contract saw a modest increase of 0.03% to $2,071.70. The price of gold has risen by close to 2% this week, reaching its peak since January 3 in the previous session on the back of expectations of an impending interest rate cut by the U.S. Federal Reserve.
Fed Chairman Jerome Powell recently pushed back on the possibility of rate cuts in March, but voiced confidence in that inflation would return to the U.S. central bank’s 2% target.
Reuters cited Carlo Alberto De Casa, market analyst at Kinesis Money, as saying:
"The remarks from Fed have not managed to damage the support scenario for gold. What can be a problem for gold is only if markets are betting on interest rates being higher for longer, but now the market is sure that the rates are going down this year”.
Market predictions now indicate a 93% chance of a rate cut by May, according to the CME Fed Watch Tool. Lower interest rates notably boost the appeal of gold, which does not yield interest.
"A transition from tightening monetary policy to easing in H2, elevated geopolitical risks and strong central bank buying should bode well for gold investment demand,” Australia-based ANZ Bank said in a note shared with Reuters.
Investors have now shifted their focus to the U.S. non-farm payrolls report, expected at 1330 GMT. Forecasts have suggested a marginal slowdown in job growth for January.
As for other precious metals, spot silver saw a minor increase of 0.1% to $23.1913 per ounce. Platinum climbed by 0.7% to $919.94, and palladium saw a 1.2% rise, reaching $974.20 per ounce.
With the price of gold gaining in January, analysts at Frankfurt-based Commerzbank shared their outlook for the yellow metal going forward, saying gold was likely to trade sideways in the first half of the year before resuming its upward trend:
“We don't see much more upside potential: after all, Fed Chairman Jerome Powell indicated at the press conference following the Fed meeting that the first Fed rate cuts are likely to take some time to come. He considered an interest rate cut as early as March to be unlikely. The Fed first wants to be sure that inflation will return to the target level on a sustained basis. Weaker economic data alone will probably not be enough.
Investors in the gold market will have to continue to be patient.
Against this backdrop, we are sticking to our view that the gold price will initially continue to trend sideways and will only resume its upward trend in the second half of the year”.
Analysts at Japan’s MUFG Bank stuck to their guns, reiterating their gold price forecast for 2024 on the back of projected strong demand.
MUFG had gold as its most bullish call for the year:
“Total gold demand hit a record in 2023 and is expected to rise again in 2024 as the Fed moves towards easing rates alongside geopolitical tensions that remain elevated.
According to the World Gold Council (WGC), overall consumption climbed by about 3% in 2023, supported by strong demand in the opaque over-the-counter market, as well as from sustained central-bank buying, which is also the highest total figure in data going back to 2010.
We reiterate our 2024 commodities views that gold is our most bullish call this year and agree with the WGC that bullion is set to hit record levels on a trifecta of Fed cuts, supportive central bank demand and bullion’s role as the geopolitical hedge of last resort”.
A gold price forecast overview by Markets.com in late 2023 shed light on several investment banks’ outlooks for the commodity. Institutions such as the Australia-based ANZ Bank and Japan’s MUFG appeared highly bullish on the yellow metal, forecasting it to potentially hit record highs in 2024 on the back of three key factors: interest rate reductions, geopolitical risks, and central bank buying.
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