Gold advanced for a third straight day after a key US inflation report reaffirmed expectations that the Federal Reserve will likely cut interest rates next week.
Spot gold gained 0.7% to trade at $2,713.85 per ounce by 11:10 a.m. ET, the highest in nearly three weeks. Meanwhile, US gold futures rose by 1.3% to $2,755.00 per ounce in New York.
Labor Department figures released on Wednesday showed US consumer prices increased by a modest 0.3% on a monthly basis, in line with expectations. Annually, it climbed 2.7% after increasing 2.6% in October.
While inflation pressures remain, this may not be enough to deter another rate cut at Fed’s meeting next week, according to analysts. Traders are predicting a 96% chance of a 25-basis-point cut at the Dec. 17-18 meeting, compared with the 86% seen before the inflation report, Reuters said.
“Gold is higher on the back of the premise that CPI data coming in benign or certainly in line with expectations, inflation not rising any further but remaining steady will allow the Fed to almost certainly cut rates at the next FOMC meeting,” said David Meger, director of metals trading at High Ridge Futures.
All eyes are now on the upcoming producer price data due on Thursday for further clarity on Fed rate cut path.
“We expect gold to reach fresh new highs in 2025, with the elevated bond yields we have today easing over the course of the year and geopolitical risks remaining a supportive driver of gold sentiment,” Nitesh Shah, commodity strategist at WisdomTree, said.
“We believe gold could reach $3,000/oz by the end of 2025,” he added.
Gold hit an all-time high above $2,790 in October, supported by the Fed’s pivot to easing, haven demand and central-bank buying.
Bullion — which rallied more than 30% this year — has enjoyed a lift in recent sessions after the People’s Bank of China reported that it has resumed purchases after a six-month pause.
China’s PBOC, which holds large USD reserves and has a strategic interest in reserves diversification, “may even increase gold demand during periods of local currency weakness to boost confidence in their currency,” according to analysts at Goldman Sachs Group.
China has purchased gold “systematically” via the over-the-counter market in London during periods of yuan weakness, including in 2014-2016, 2018-2020, and 2022 until today, Goldman said in a note on Tuesday.
(With files from Bloomberg and Reuters)
