Gold Prices Steady Amid Year-End Lull, Poised for Strong Annual Gains
Gold prices remained largely flat during Asian trading hours on Tuesday as year-end trading volumes thinned. However, the precious metal is on track to post impressive yearly gains, driven by significant interest rate cuts from the U.S. Federal Reserve earlier in 2024.
Spot gold held steady at $2,607.65 per ounce, while February gold futures slipped slightly by 0.2% to $2,620.22 an ounce as of 00:23 ET (05:23 GMT).
Trading activity in gold typically slows during the final weeks of the year as institutional traders and market participants wrap up their books ahead of the holiday season.
Gold Set for Robust 2024 Gains
Gold prices have surged over 26% in 2024, fueled by the Federal Reserve’s aggressive rate cuts and heightened geopolitical tensions worldwide.
When interest rates are low, gold becomes more attractive as an investment since the opportunity cost of holding it decreases compared to interest-bearing assets such as bonds or savings accounts. This dynamic often pushes investors to allocate more funds toward gold as a store of value and hedge against uncertainty.
Despite a strong performance throughout the year, gold faced some pressure following the Federal Reserve’s December meeting, where policymakers signaled fewer rate cuts in 2025. The central bank now expects only two rate cuts next year, compared to earlier projections of four, citing persistent inflationary concerns.
The Fed’s stance caused a sharp pullback in gold prices, which have since moved within a narrow range, reflecting a cautious market outlook for 2025.
The expectation of fewer rate cuts has also bolstered the U.S. dollar, further weighing on gold. A stronger dollar typically pressures gold prices by making the metal more expensive for buyers using other currencies.
Other Precious Metals See Minor Declines
On Tuesday, other precious metals edged lower. Platinum futures dropped 0.4% to $913.65 an ounce, while silver futures dipped 0.3% to $29.315 an ounce.
Copper Prices Subdued Despite China’s Factory Growth
Industrial metal prices, including copper, remained subdued as a firm dollar continued to exert pressure.
While the U.S. Dollar Index softened slightly during Asian trade on Tuesday, it stayed near its two-year high, maintaining its weight on commodity prices.
Meanwhile, data from China showed manufacturing activity grew for the third consecutive month in December, supported by a wave of new stimulus measures. However, the expansion was slightly below market expectations and the previous month’s reading.
Benchmark copper futures on the London Metal Exchange slipped 0.2% to $8,925.50 a ton, while February copper futures remained steady at $4.0885 a pound.
