TLDR
- Gold prices increased 0.3% to $4,209.43 per ounce as U.S. dollar hit five-week lows
- Federal Reserve rate cut probability stands at 87% for December 9-10 meeting
- November private payrolls saw steepest decline in over two years supporting rate cut case
- Silver posted record high of $59.32 per ounce Friday, up 100% year-to-date
- Analysts forecast gold could reach $4,500 per ounce in 2026 with continued Fed easing
Gold prices edged higher Monday as the U.S. dollar weakened to its lowest level in five weeks. Spot gold traded 0.3% higher at $4,209.43 per ounce during morning hours.
The dollar index hovered near one-month lows last touched December 4. Lower dollar values make gold cheaper for international buyers using foreign currencies.
Gold futures for December delivery slipped 0.1% to $4,239.40 per ounce. The modest decline in futures contracts contrasted with spot market gains.
Markets are anticipating the Federal Reserve will cut interest rates this week. The central bank’s two-day policy meeting runs December 9-10 with a decision expected Wednesday.
Weak Economic Data Supports Rate Cut Scenario
CME’s FedWatch tool shows traders pricing in an 87% chance of a 25-basis-point rate reduction. This probability increased after several weak economic reports last week.
Private sector payrolls experienced their sharpest decline in more than two-and-a-half years during November. Consumer spending grew at a moderate pace in September reflecting slowing economic activity.
The core Personal Consumption Expenditures index showed limited monthly growth. This inflation measure is the Fed’s preferred gauge for price pressures.
Giovanni Staunovo from UBS said gold is benefiting from both dollar weakness and rate cut expectations. Lower rates reduce the cost of holding non-interest-bearing assets like gold.
Fed Chair Jerome Powell will hold a press conference after the policy announcement. Investors will analyze his comments for clues about future rate moves.
However, some Federal Reserve officials have expressed concern about cutting rates too soon. This disagreement has introduced uncertainty into the policy outlook.
Treasury yields moved higher in recent trading sessions. The yield increase limited gold’s gains despite the weaker dollar.
Silver Reaches New Record Territory
Silver prices gained 0.3% to $58.43 per ounce Monday. The precious metal set a new record high of $59.32 per ounce during Friday’s session.
Silver has doubled in value throughout 2024 driven by supply constraints. The U.S. government’s designation of silver as a critical mineral has supported prices.
Staunovo noted silver benefits from the same factors driving gold higher. Expectations of increased industrial demand from stimulus measures have helped silver outperform gold recently.
The white metal serves dual purposes as both an investment and industrial commodity. This characteristic has amplified silver’s price gains compared to gold.
Platinum climbed 0.6% to $1,650.90 per ounce. Palladium advanced 1% to $1,471.26 per ounce.
Other Metals Trade Mixed
Copper futures on the London Metal Exchange rose 0.3% to $11,681.20 per ton. U.S. copper futures decreased 0.7% to $4.67 per pound.
Staunovo projected gold prices could climb to $4,500 per ounce next year. His forecast assumes the Fed will implement additional rate cuts through 2026.
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