Gold Trades Near 6-month High on Potential Fed Slowdown

Gold prices climbed on Tuesday and traded near a six-month high amid increased expectations for a slowdown in the pace of rate hikes from the Federal Reserve, which may weaken the US dollar and Treasury yields.

Spot gold rose 0.6% to $1,834.81 per ounce, while gold futures gained 0.7% to $1,840.65 per ounce. The two instruments were close to their strongest levels since June.

Industrials metals, particularly copper, edged higher by 0.2% to $3.81 per pound, also being driven by a falling greenback.

The red metal posted robust gains in recent sessions on the possibility that an economic reopening in China, the world’s largest importer of copper, would help support a rebound in demand.

Gold Expected to Surge on Fed Slowdown

While the yellow metal somewhat finished 2022 in the red, it is expected to find support in less aggressive increases in interest rates this year. Recent data signaled that inflation in the world’s largest economy could have peaked. Higher interest rates have hit metal markets in the previous year.

Gold received numerous bids towards the end of December amid growing bets that the Fed would practice smaller rate hikes next month. Markets are now estimating more than a 90% chance of a 25-basis point hike from the US central bank following a 50-basis point hike last month.

That also helped the yellow metal beat many risk-driven assets in 2022, despite a surging dollar and Treasury yields consuming safe-haven demand for gold.

Other precious metals, including platinum and silver, performed better than gold in the past year. Platinum prices soared more than 10% amid concerns about supply shortages caused by US sanctions on Russian producers, while silver added over 4% on a potential improvement in demand.

Investors now await the minutes of the Fed’s December meeting, set to be released on Wednesday. Markets will keep an eye on any additional hints at a further slowing in raising interest rates in the coming months.