Gold Futures Settle Higher As Dollar Drops On Rate Cut Bets

Gold prices climbed higher on Tuesday as the dollar shed ground and bond yields dropped amid bets the Federal Reserve will start reducing rates next year.

The Bank of England and the European Central Bank left their interest rates unchanged last week, following the U.S. central bank’s decision to hold rates.

Chicago Fed President Austan Goolsbee said on Monday that he was confused by market reaction to Fed Chief’s remarks on possible rate cuts and the U.S. central bank is not precommiting to cutting rates soon and swiftly.

Cleveland Fed President Loretta Mester also said that financial markets had got “a little bit ahead” of the central bank with respect to rate cut expectations.

On the other hand, San Francisco Fed President Mary Daly said cuts to the U.S. central bank’s benchmark rate are likely to be appropriate next year because of an improvement in inflation.

CME Group’s FedWatch Tool is currently indicating a 67.5% chance the Fed lowers rates by a quarter point in March 2024.

The dollar index dropped to 102.07, losing nearly 0.5%.

Gold futures for February ended higher by $11.60 at $2,052.10 an ounce.

Silver futures for March ended up $0.214 at $24.321 an ounce, while Copper futures for March settled at $3.8980 per pound, gaining $0.0460.

In U.S. economic releases, a report from the Commerce Department said housing starts soared by 14.8% to an annual rate of 1.560 million in November after inching up by 0.2% to a downwardly revised rate of 1.359 million in October.

The surge surprised economists, who had expected housing starts to decrease by 0.9% to an annual rate of 1.360 million from the 1.372 million originally reported for the previous month.

Meanwhile, the Commerce Department said building permits slumped by 2.5% to an annual rate of 1.460 million in November after jumping by 1.8% to an upwardly revised rate of 1.498 million in October.

Building permits, an indicator of future housing demand, were expected to fall by 1.1% to an annual rate of 1.470 million from the 1.487 million originally reported for the previous month.

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