1. Gold Prices Stabilize Amid Market Caution

Gold prices remained below critical levels on Wednesday as investors exercised caution with non-yielding assets ahead of the Federal Reserve’s final meeting for the year. Recent indicators of strength in the labor market and persistent U.S. inflation have tempered expectations for an early interest rate cut in 2024. While the Fed is anticipated to maintain rates later in the day, the outlook for 2024 introduces an element of uncertainty.

2. Recent Swings in Gold Prices

Uncertainty surrounding the Federal Reserve has led to significant fluctuations in gold prices this month. The yellow metal briefly reached record highs, surpassing $2,100 an ounce, before experiencing a notable downturn. Recent losses saw gold lose the coveted $2,000 an ounce level, particularly as the dollar strengthened in anticipation of the Fed’s decision. Spot gold steadied at $1,979.06 an ounce, while gold futures for February remained flat at $1,993.70 an ounce by 00:26 ET (05:26 GMT).

3. Federal Reserve’s Rate Decision

The Federal Reserve is widely expected to maintain interest rates during its final meeting for 2023. Attention is focused on signals from Fed Chair Jerome Powell regarding the trajectory of rates through 2024, with concerns over a potentially hawkish stance. Powell has maintained a higher-for-longer stance on rates, acknowledging significant progress against inflation. However, inflation remains above the Fed’s 2% annual target as of November.

4. Market Split Over 2024 Rate Cuts

Market sentiment is divided over potential rate cuts in 2024, adding to the uncertainty. Fed funds futures prices indicate a 43% chance of a rate cut in March, down from the 60% forecasted last week. Higher rates negatively impact gold as they elevate the opportunity cost of investing in the precious metal.

5. Copper Prices Decline Amid China Concerns

In the realm of industrial metals, copper prices continued their descent due to persisting concerns over China, the top importer of copper. Copper futures for March declined by 0.4% to $3.7782 a pound. Signs of deepening disinflation in China contributed to substantial losses in copper this week. Fears of deteriorating economic conditions in the leading copper importer raised concerns about reduced demand for the metal.

6. China’s Pledge for Stimulus

While Chinese officials pledged additional stimulus measures to support economic growth, copper prices and broader markets displayed limited relief. Skepticism persists as Beijing has been slow to implement supportive measures throughout the year, contributing to ongoing market uncertainties.