Gold at one-month low after US Fed flags slower rate cut pace next year

GOLD prices languished near a one-month low on Thursday (Dec 19) after the US Federal Reserve indicated it would slow the pace of its monetary policy easing cycle next year, lifting the US dollar and Treasury yields.

Spot gold were little changed at US$2,588.80 per ounce as at 0008 GMT, after dropping more than 2 per cent overnight to hit its lowest since Nov 18. US gold futures were down 1.9 per cent to US$2,602.70.

The Fed cut rates by 25 basis points to the 4.25 to 4.5 per cent range and its summary of economic projections (SEP) indicated it will make rate cuts totalling a half percentage point by the end of 2025.

Fed chair Jerome Powell said that Fed policymakers want to see more progress on bringing inflation down as they consider the path of future rate cuts, as inflation has exceeded year-end projections.

The US dollar index rose to its highest level in two years after the rate cut decision from the Fed, making gold more expensive for other currency holders, while US Treasury yields surged.

Markets now expect the Fed to leave its benchmark overnight rate unchanged at the Jan 28 to 29 policy meeting. Higher rates reduce the appeal of holding the non-yielding asset.

Traders now looked forward to key US GDP and Core Personal Consumption Expenditure data due later this week for more cues on monetary policy.

Meanwhile, the Hong Kong Monetary Authority cut its base interest rate charged via the overnight discount window by 25 basis points to 4.75 per cent, tracking the move by the Fed.

The Indian government is re-examining a surge in gold imports that widened the country’s trade deficit to a record in November and pushed the rupee to an all-time low, two government sources aware of the matter told Reuters.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.03 per cent to 863.9 metric tonnes on Wednesday.

Spot silver was steady at US$29.37 per ounce, platinum was down 0.4 per cent to US$915.45 and palladium eased 0.2 per cent to US$901.30. REUTERS