Gold touches one-week high as Fed hints at lower US rates next year

The dollar slipped to a four-month low, while the U.S. benchmark 10-year yield dropped to its lowest level since late July.

Gold prices touched a one-week high on Thursday as the U.S. dollar and Treasury yields were beaten lower after the Federal Reserve signaled an end to its monetary policy tightening cycle.

Spot gold rose 1% at $2,046.69 per ounce as of 9:46 a.m. ET (1446 GMT), after surging 2.4% on Wednesday. U.S. gold futures jumped 3.2%, to $2,061.60.

"Fed’s dovish pivot was telegraphed over yesterday’s FOMC meeting and very pragmatically gave a green light for markets to price in a more aggressive Fed cutting cycle on the horizon, and we expect that the market will run with it," said Daniel Ghali, commodity strategist at TD Securities.

"This is extremely positive for gold prices, given that investor demand was one of the missing pieces for the rally to new all-time highs to be sustained."

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The dollar slipped to a four-month low, while the U.S. benchmark 10-year yield dropped to its lowest level since late July.

Seventeen of 19 Fed officials projected lower interest rates by end-2024, after the Fed kept interest rates steady for the third meeting in a row, as was widely expected.

Markets are now pricing in around an 83% chance of a rate cut in March from the Fed, according to the CME FedWatch tool.

The European Central Bank also left interest rates unchanged as expected on Thursday, signalling an early end to its last remaining bond purchase scheme.

"We retain a positive outlook for gold, targeting a price of $2,250 per ounce by end-2024," UBS analyst Giovanni Staunovo said.

Elsewhere, spot silver rose 1.6% to $24.14 per ounce, platinum gained 1.7% to $949.70 and palladium climbed 6.5%, to $1,056.97.