Gold futures were little changed to end the trading week, but the yellow metal registered its fifth consecutive weekly gain on prospects of falling interest rates. But recent movements in the US dollar and Treasury yields could apply pressure on gold prices.
October gold futures rose $4.60, or 0.13%, to $3,682.90 per ounce at 12:13 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold will squeak out a 0.1% weekly gain, the fifth straight one. The precious metal has soared 40% this year, registering dozens of all-time highs.
Silver, the sister commodity to gold, remained above $42 to close out the trading week. December silver futures advanced $0.192, or 0.46%, to $42.31 per ounce. The white metal advanced 0.6% this week, adding to its year-to-date rally of almost 45%.
The Federal Reserve cut interest rates this week for the first time this year, lowering the benchmark federal funds rate by a quarter point to a new target range of 4% to 4.25%. While the US central bank opened the door to a series of rate cuts, monetary policymakers presented a more conservative outlook.
Instead of invesors’ expectations of the policy rate reaching 2% by the end of next year, the Summary of Economic Projections predicted the federal funds rate settling at 3% by the end of 2027.
Fewer rate cuts than expected could pose a fresh challenge for gold prices, as it would keep Treasury yields elevated and potentially strengthen the US dollar.
Yields on Treasury securities have already risen in the wake of the Federal Reserve restarting its easing campaign. The benchmark ten-year yield rose 2.9 basis points on Friday to 4.135%, up about 13 basis points since Wednesday.
The two-year yield, which tracks Fed policymaking, rose to 3.58%. The 30-year bond yield climbed 2.3 basis points to above 4.74%.
Fluctuating interest rates impact non-yielding bullion because they can affect the opportunity cost of holding gold.
The greenback, meanwhile, is set to record its first weekly gain in months. The US Dollar Index (DXY), a measure of the buck against a weighted basket of currencies, advanced 0.39% to 97.73, from an opening of 97.34. The index is poised for a weekly increase of 0.2%, trimming its year-to-date decline to below 10%.
A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.
Still, market watchers anticipate gold prices will maintain their upward trajectory heading into the new year.
“Key thing that is driving gold prices is the continued dollar depreciation as year-to-date it has been very strong and we believe the pattern to continue,” said Nitesh Shah, commodities strategist, WisdomTree, according to CNBC.
“Gold prices are well positioned for a significant gain, and we expect this time next year gold prices to be around $4,300.”
In other metal markets, October copper futures were flat at $4.5535 per pound. October platinum futures tumbled $10.70, or 0.76%, to $1,389.50 an ounce. October palladium futures declined $13.60, or 1.15%, to $1,173.00 an ounce.