(Bloomberg) -- Gold headed for a weekly drop, as traders weighed the interest-rate outlook after the US Federal Reserve dialed back rate-cut expectations for next year.
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Bullion traded above $2,605 an ounce, and is down 1.6% for the week. The Fed reduced rates on Wednesday, but investors were more focused on comments from Chair Jerome Powell, who said that while the bank was “on track to continue to cut,” officials would first have to see more progress on inflation. Lower rates are typically a positive for gold, as it doesn’t pay interest.
Traders were also weighing Thursday’s US GDP data, which showed the economy remained resilient — weakening the need for imminent rate cuts. Meanwhile, consumer spending was revised up to 2.2%, adding to the case for a slower pace of easing. Markets will now be closely watching the last noteworthy piece of data for the year — personal consumption expenditures for November — due Friday.
“The market will take some time to adjust to the pivot the Fed appears to have taken on rates,” ANZ Group Holdings Ltd. analysts, including Mahjabeen Zaman and Brian Martin, said in a note. “The near-term outlook could also be challenged by weakening physical demand in India.”
The precious metal has surged 26% this year in a record-breaking run that’s been supported by monetary easing in the US, safe-haven demand, and sustained buying by the world’s central banks. The rally has stalled since early November, however, as Donald Trump’s US election victory buoyed the dollar.
Spot gold traded at $2,605.50 ounce at 8:08 a.m. in London, edging 0.4% higher on Friday. The Bloomberg Dollar Spot Index was 0.1% lower, following a gain of 1.2% over the previous three sessions. Silver and palladium were little changed, while platinum fell.
--With assistance from Preeti Soni and Atul Prakash.
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