Gold climbs on hopes of Fed’s dovish turn in 2024

Gold prices rose above key levels in Asian trade on Thursday,extending the gains made in the previous session after the Federal Reserve announced that it had reached the end of its cycle of interest rate hikes and projected lower borrowing costs in 2024. 

In its announcement, the Fed made clear that it would maintain its key interest rate at the current level and not raise it further, as had been widely expected. The Fed also stated that it expected to cut rates by a larger-than-expected margin in 2024, citing the significant progress made in bringing inflation down to its two per cent annual target.

The Fed’s decision to hold off on raising rates further and its more dovish tone towards future policy sparked widespread speculation among market participants over when the Fed might begin cutting rates, and also led to a sharp decline in the value of the US dollar, which fell close to a four-month low. 

The prospect of lower U.S. interest rates in the future led to increased demand for the yellow metal, with prices rising above $2,000 per ounce. Gold futures for February delivery on the Comex exchange rose by over two per cent to $2,046.45 per ounce, while spot gold prices rose by 0.2 per cent to $2,031.88 per ounce.

However, the price of gold remained well below the record highs of over $2,100 per ounce that were reached earlier this month. 

Analysts attributed this to lingering uncertainty about the timing and extent of the Federal Reserve’s interest rate cuts, as well as as the ongoing global economic slowdown.

Despite the current rally, many market participants believe that gold’s long-term outlook remains uncertain, with the metal’s ability to hold its gains dependent on further developments in global economic conditions and monetary policy.

Analysts have noted that gold’s recent gains have been driven largely by safe-haven demand, as investors seek to protect their portfolios from the volatile global economic conditions.