Gold prices were largely unchanged in Asian trading on Friday, marking a period of subdued market activity typical for the year-end. The precious metal was under pressure from the strong US dollar, which has been buoyed by a hawkish tilt from the U.S. Federal Reserve (Fed). Despite this, gold was poised to edge higher over the week, reflecting a cautious market outlook following the Fed’s recent policy announcements.
Current Gold Price Movements
- Spot Gold was trading at $2,633.40 per ounce.
- Gold Futures expiring in February were down by 0.2% at $2,649.91 per ounce by 00:20 ET (05:20 GMT).
As is common toward the end of the year, trading volumes were thin, with many institutional traders and market participants closing their books for the holiday season. The lack of significant economic data or major policy decisions around this time also contributed to a muted trading environment, making it difficult for gold to show significant price movements.
Year-End Market Trends and Fed’s Hawkish Stance
The year-end period often sees a reduction in price volatility, as many traders step back from active positions. This typically results in lower liquidity, and gold prices often experience relatively little fluctuation.
However, despite the subdued trading, gold was set to edge up by 0.3% for the week, recovering somewhat after losing more than 1% in the previous week. This small recovery was driven by a more cautious outlook after the U.S. Federal Reserve’s hawkish shift during its last policy meeting. The central bank’s guidance indicated only two more rate cuts in 2025, down from previous market expectations of four, which initially triggered a drop in gold prices.
Gold Prices Under Pressure from Strong Dollar
The US Dollar Index (DXY), which measures the strength of the dollar against a basket of six major currencies, remained slightly higher in Asian trade, staying close to the two-year high it reached last week. A stronger dollar tends to exert downward pressure on gold prices because it makes the yellow metal more expensive for holders of other currencies, reducing its demand.
The Fed’s hawkish stance on interest rates is another contributing factor. As the central bank signals fewer rate cuts than expected, the dollar remains robust, and higher interest rates reduce the appeal of non-yielding assets like gold. When interest rates rise, gold competes with interest-bearing assets such as bonds, making them more attractive and thereby diminishing demand for gold.
Other Precious Metals Show Limited Movement
- Platinum Futures were unchanged at $954.50 per ounce.
- Silver Futures remained steady at $30.38 per ounce.
Both platinum and silver followed gold’s subdued trend, showing little movement despite the broader market developments.
Copper Prices Rise Amid Shortage of Copper Concentrates
In contrast to precious metals, industrial metals like copper showed more movement. Copper prices rose after reports that China’s leading copper smelters had lowered their processing charge guidance for the first quarter of 2025, highlighting an ongoing shortage of copper concentrates.
- Benchmark Copper Futures on the London Metal Exchange rose by 0.5%, reaching $9,008.50 per ton.
- February Copper Futures were slightly down by 0.1% at $4.1360 per pound.
The supply constraints due to lower processing charge guidance are expected to continue into the next quarter, but the strong dollar capped copper’s gains, as it made the metal more expensive for buyers outside of the dollar zone.
Market Outlook
The strong dollar and the hawkish Fed stance are expected to continue to exert pressure on gold prices in the near term, particularly as gold’s non-yielding nature becomes less appealing in a higher interest rate environment. Gold traders will be watching for any new developments regarding US economic data, Federal Reserve policy, and global geopolitical events, all of which could impact the outlook for both gold and the broader commodities market.
For copper, the supply issues due to lower processing charges in China may offer some upside potential, but the strong dollar remains a limiting factor for both industrial and precious metals.
As the year draws to a close, the market’s focus will shift to 2025 expectations, including potential Fed actions, inflation dynamics, and global economic growth, which will likely shape the direction of key commodities like gold and copper in the first quarter of the new year.
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