Gold takes a breather after record run on rate cut bets

Gold takes a breather after record run on rate cut bets

Gold edged down after scaling a record high on December 4, with growing confidence that the US Federal reserve would cut interest rates early next year keeping bullion well above $2,000.

Spot gold slipped about 0.1% at $2,068.39 per ounce by 1036 GMT. US gold futures also fell 0.1% to $2,087.20.

"If signs of low interest rates become more evident, gold should continue to soar next year. Yet, the price of the precious metal will not move in a one-way street upwards," with technical indicators suggesting the market has overheated, said Alexander Zumpfe, a precious metals trader at Heraeus.

While there may be short-term profit-taking, "this doesn't change the fact: The sentiment for gold is positive," he added.

Keeping gold's gains in check, the dollar index edged up 0.2%, making bullion more expensive for other currency holders. [USD/]

Earlier in the Asian session, gold jumped nearly 2% to a record high of $2,111.39 on renewed expectations of a rate cut following Federal Reserve Chair Jerome Powell's comments on Friday.

Traders are now pricing in a 70% chance for a rate cut by March, CME's FedWatch Tool showed. Lower rates reduce the opportunity cost of holding bullion, which yields no interest.

However, "in the near term, gold could fall below $2,000/oz if earlier Fed pricing proves too aggressive. Ultimately, we are buyers on dips and forecast $2,250/oz by end-2024," UBS said in a note.

Comex gold speculators raised net long position by 29,517 contracts to 144,410 in week to Nov. 28, data from the Commodity Futures Trading Commission showed on December 1. [CFTC/]

Traders now await the US non-farm payrolls numbers on December 1, which could help further gauge the interest rate outlook, after data last week pointed out to cooling inflationary pressures and a gradually easing labour market.

Silver slipped 1.1% to $25.14 per ounce, palladium fell 2% to $979.94, and platinum dipped 1.1% to $923.01.