Gold price set for third week of gains as investors watch Powell speech, Federal Reserve cuts

Gold prices were poised for a third consecutive weekly increase following data indicating a slowdown in inflation, raising expectations of potential interest rate cuts by the U.S. Federal Reserve (Fed). Investors will be closely watching Fed Chair Jerome Powell's speech on Friday for cues about the central bank’s monetary policy stance.

As of 0932 GMT on Friday, spot gold saw a 0.6% rise to $2,048.36 per ounce, marking an approximately 2.3% gain for the week. In November, the precious metal recorded its second consecutive monthly increase, rising by $60.

U.S. gold futures for February delivery registered a 0.6% increase, reaching $2,068.50.

Recent data revealed moderate U.S. consumer spending in October, coupled with the smallest annual rise in inflation in over two and a half years. Another report indicated a slight increase in U.S. jobless claims, suggesting a softening labor market.

U.S. interest rates: Markets eyeing Fed rate cut timeline for 2024

Traders have adjusted their expectations for a Federal Reserve rate cut, with the probability increasing from about 80% in May to a one-in-two chance in March, according to CME's FedWatch Tool. Lower interest rates diminish the opportunity cost of holding gold, which is generally seen as a “safe haven” asset. 

Further supporting gold, 10-year Treasury yields declined, and the DXY dollar index showed its weakest monthly performance in a year in November.

Gold price forecast: Commerzbank sees downside potential for gold in coming months

In a gold price forecast issued on Friday, analysts at Frankfurt-based Commerzbank said expectations of rate cuts for early 2024 may be overblown, meaning the price of gold could potentially retract: 

According to the Fed fund futures, market participants now expect the first 25 bps rate cut to be implemented by the Fed by May. 50 bps of rate cuts by mid-2024 are priced in. We believe that the market is getting ahead of itself here: our economists don’t expect to see the first Fed rate cut until the third quarter of 2024. We therefore envisage downside potential for the gold price in the coming months if the rate cut expectations for the first half of 2024 – which we regard as premature – have to be scaled back.

As we are confident that the Fed will lower its interest rates quite significantly in the second half of next year though, namely by a total of 100 bps, the gold price should then be able to gain again and climb to a new all-time high of $2,100.”

At the time of writing, the front-month gold futures contract on the NYMEX traded around the $2,046 mark, as per MarketWatch data.

The price of gold remains close to 12.4% up year-to-date as of December 1. 

Spot silver also saw a 0.5% increase to $25.37, while platinum climbed 0.8% to $935.12 per ounce, both on track for a third consecutive week of gains.

When considering gold and other commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.