Gold poised for second weekly gain as Fed pause hopes hurt dollar

Nov 24 (Reuters) – Gold held steady on Friday, set for its second consecutive weekly gain, supported by a weaker U.S. dollar as markets grew confident that the Federal Reserve was done with its interest rate hikes.

Spot gold held ground at $1,992.73 per ounce, as of 0431 GMT. Bullion has risen 0.7% this week. U.S. gold futures were little changed at $1,993.60.

“The theme in financial markets over the past week has been falling yields and a falling U.S. dollar, and… (these) are conducive for gold to move higher,” said KCM Trade Chief Market Analyst Tim Waterer.

The dollar index (.DXY) was on track for a second weekly drop, making gold less expensive for other currency holders.

Markets have dialled back expectations of Fed rate cuts in 2024 after data showed number of Americans filing new claims for unemployment benefits fell more than expected last week.

However, the stronger than expected jobs data did not change the view that the labor market is slowing in the U.S. amid higher rates.

Earlier this week, the Fed minutes showed the central bank would proceed “carefully” and “all participants judged it appropriate to maintain” the current rate setting.

Traders widely expect the Fed to leave rates unchanged in December, while pricing in about a 26% chance of a rate cut as early as March, according to CME’s FedWatch Tool.

“There is that disconnect between market expectations for rates and what the Fed minutes showed and that’s what’s causing some hesitation in the price of gold,” Waterer said.

Lower rates decrease the opportunity cost of holding gold.

Spot gold may retest a resistance at $1,999 per ounce, a break above which could lead to a gain into $2,009-$2,016 range, according to Reuters technical analyst Wang Tao.

Spot silver gained 0.2% to $23.71 per ounce, palladium rose 0.3% to $1,049.12. Platinum eased 0.1% to $914.68, but was heading for its second weekly rise.

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