Gold prices touched three-week high at ₹63,452 per 10 gm on Thursday against the previous close of ₹63,223 after the US dollar and bond yields hit multi-month lows.

On the MCX, gold for February delivery was down ₹198 to ₹63,480 and April contract lost ₹180 to close at ₹63,800.

In the US, spot gold was up 0.5 per cent at $2,086.69 per ounce hitting its highest since December 4, when prices raced to a record high of $2,135.40.

Gold prices surged on market expectations of an early cut in US interest rate by the Federal Reserve in the first quarter of next year. The surge in gold prices was prompted by a significant decline in the US core Personal Consumption Expenditure price index in November, reinforcing hopes of imminent rate cuts by the Fed.

Change in Fed stance

Ajay Kumar, Director, Kedia Commodities, said investors are currently pricing in the first rate cut in March, followed by a second cut in May, marking a shift from the central bank’s recent trend of historically rapid rate-tightening.

The expectation of rate cuts is influenced by a change in Fed policymakers’ stance, as they may now support an early reduction in borrowing costs to address the prolonged tightening of interest rates. This shift is seen as a potential driver for overall employment and economic conditions, he said.

The buoyant sentiment around rate cuts has also contributed to a rise in home prices, which had remained subdued from February 2022 until June. Additionally, the stronger-than-expected 5.4 per cent growth in new orders for durable goods in November, compared to a contraction of 5.1 per cent in October, adds to the positive economic indicators.