IGI Logo

Gold prices gained on Friday and were headed for their best year in three, supported by expectations that the U.S. Federal Reserve could begin easing its monetary policy as early as March next year.

Spot gold rose 0.02% to $2,065.29 per ounce by 1003 GMT. U.S. gold futures, however, lost 0.4% to $2,074.40 per ounce.

Bullion has risen about 14% so far this year, heading for its biggest annual gain since 2020 after prices surged to an all-time high of $2,135.40 on Dec. 4.

"In the near term, gold could trade mostly in the $1,950-$2,150 range, with volatility fuelled by macroeconomic data and the correlated expectations about forthcoming cuts in U.S. interest rates, but also by unexpected developments in geopolitical risks," said Intesa Sanpaolo economist Daniela Corsini.

Analysts expect that gold's recent rally could carry over to 2024 on the back of a softer U.S. dollar and Treasury yields as traders wager a pivot to interest-rate cuts early next year.

"In case of bullish expectations about the Fed's monetary easing and unexpected escalation in geopolitical risks, gold could hit new records, with $2,300 being the probable maximum top," Corsini said.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar.

The dollar index fell and was headed for a 2% decline in 2023, snapping strong gains in the last two years. Yields on 10-year Treasury notes ticked up slightly, but were still languishing near their lowest level since July. [US/] [USD/]

Spot silver fell 1% to $23.6901 per ounce and looked set to log a 1% yearly decline.

Platinum lost 0.1% to $1,001.06 per ounce, while palladium lost 1.5% to $1,115.62. Both autocatalytic metals were on track for a yearly decline, with palladium down around 38% - its biggest drop since 2008.