Gold Prices Head for Weekly Loss as Fed Rate-Cut Optimism Fades

Gold prices are set to decline for the week as investors reassess the interest rate outlook following the Federal Reserve's latest pronouncements and economic data releases, reports Bloomberg.

Bullion traded near $2,590 an ounce on Friday morning, down approximately 2% for the week. While the Fed did cut rates on Wednesday, Chair Jerome Powell's subsequent comments have dampened expectations of aggressive rate cuts in the near future. Instead, Powell indicated that further easing would depend on further progress in taming inflation.

"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," Bloomberg reports.

Thursday's US GDP data, showing a resilient economy, further weakened the argument for immediate rate cuts. Additionally, the upward revision of consumer spending to 2.2% bolsters the case for a more gradual pace of monetary easing.

Market focus now shifts to Friday's release of November's personal consumption expenditures (PCE) data, the last major economic indicator for the year.

Gold has enjoyed a record-breaking rally this year, fueled by US monetary easing, safe-haven demand, and sustained central bank buying. However, the rally has stalled since early November as Donald Trump's election victory boosted the dollar.

Spot gold was trading near $2,593.29 an ounce, following a slight 0.3% increase on Thursday. The Bloomberg Dollar Spot Index rose 0.1% following a 1.2% gain over the previous three sessions. Silver, palladium, and platinum all declined.