H.G Markets :

Gold maintained levels above $2,050 per ounce on Friday, poised for nearly a 2% weekly gain, as the dollar and Treasury yields retreated amid strong expectations of US interest rate cuts in 2024. Despite Federal Reserve Chair Jerome Powell signaling a March cut as not the base case, the market still holds a 38% chance of a cut, down from over 70% a month ago.

 Gold shrugged off indications from the Fed that interest rate cuts would be delayed in 2024, leveraging dollar losses and approaching 2024 peak levels. However, gold price gains subsided on Friday as markets awaited payrolls data, which is anticipated to influence the Fed’s decisions on interest rates.

 In the monetary policy statement, the Federal Reserve (Fed) refrained from explicitly mentioning upcoming rate cuts due to insufficient evidence of a sustainable return of underlying inflation to the 2% target. However, policymakers indicated in the latest Summary of Economic Projections (SEP) that interest rates might be reduced by 75 basis points (bps) in 2024. Gold prices could see volatility ahead as the United States Bureau of Labor Statistics (BLS) is set to report January’s Nonfarm Payrolls (NFP) data.

 Investors expect a moderation in labor demand and a slowdown in wage growth amid the Fed’s prolonged maintenance of restricted interest rates. Despite the Fed downplaying expectations for a March rate cut, the CME Fedwatch tool indicates traders are now pricing in a potential 25 basis point cut in May, supporting gold prices.

 Goldman Sachs analysts anticipate at least four more rate cuts after May. While near-term U.S. rates are expected to stay high, the prospect of eventual rate declines, as highlighted by Fed Chair Jerome Powell, is a positive factor for gold prices. The Fed remains non-committal on the timing and extent of planned rate cuts, emphasizing a data-driven approach. The upcoming nonfarm payrolls data on Friday is crucial in shaping the Fed’s outlook, especially regarding a cooling labor market, a factor considered in rate decisions.

While expectations point to a January labor market slowdown, recent readings have consistently exceeded projections. Copper prices declined on Friday, closing the week lower, as worries persist about a slow economic recovery in China, the leading importer. March copper futures fell 0.5% to $3.8342 per pound, marking a 0.3% weekly drop. The decline was fueled by disappointing purchasing manager’s index data from China, indicating ongoing contraction in manufacturing activity, raising concerns about demand slowdown in the country. Analysts project mid-2024 for rate cuts commencement, eyeing three reductions this year. Investors await the influential US monthly jobs report on Friday for further rate guidance.