Gold is poised to record its best gains in three years

The US dollar is declining as expectations for a rate cut in March increase.

By Raed Alkhedr | @raedalkhedr | 27 December 2023

Market close
  • Gold stabilizes near the $2067 per ounce levels.

  • Expectations of a rate cut in March have reached 80%.

  • Gold gains from the ongoing depreciation of the U.S. dollar.

Gold stabilizes amid the absence of significant economic data

Gold prices remained steady during Tuesday's trading session, characterized by a calm atmosphere prevailing in global markets, as important economic data was absent due to Christmas celebrations.

The yellow metal witnessed strong gains in the last month of 2023, as markets prepared for the U.S. Federal Reserve's shift towards expansionary monetary policy and interest rate cuts starting in 2024. This resulted in robust increases for gold, reaching new record levels.

As the year comes to an end, gold is on track to achieve its best pace of gains in three years, despite profit-taking activities following its peak at $2145 per ounce. Gold is set to surpass a 10% gain this year, marking its best performance since 2020.

Gold remained stable in today's trading near the $2067 per ounce levels, not far from its recent peak at $2070 per ounce on Friday. Meanwhile, gold futures rose by 0.5% to reach $2079 per ounce.

Selling pressure continues to dominate the U.S. dollar

Selling pressure persists in the trading of the U.S. dollar, as the dollar index decreased by 0.14%, currently trading near 101.40. The dollar index stabilized near its lowest levels in 5 months, heading towards its worst performance since 2020.

The pressures on the dollar increased with ongoing disappointing economic data from various sources and continued slowing inflation growth. Recent data released last Friday showed a continued slowdown in the growth of the consumption expenditure index, the Federal Reserve's preferred measure of inflation.

These data reinforced global market expectations for the U.S. Federal Reserve to cut interest rates at its meeting in March, reaching a probability of 80%, according to CME Group. In its latest meeting, the Federal Reserve indicated the possibility of three interest rate cuts in 2024, putting pressure on the performance of the U.S. dollar against most currencies and commodities.