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Gold prices (XAUUSD:CUR) rose on Tuesday, starting the year on a high after clocking a 13% annual gain in 2023 – its best year since 2020 – supported by a weaker dollar and expectations of interest rate cuts by the U.S. Federal Reserve. Lower interest rates decrease the opportunity cost of holding non-yielding bullion and boosts its demand.
Investors’ focus now shifts to the minutes from the last Fed meeting due on Thursday for more cues on rate cuts this year and a slew of economic data. Market participants are now pricing in an 80% probability of a Federal Reserve interest-rate cut in March.
At that point, investors may consider starting building greater-sized, longer-term positions in physical gold ETFs such as GLD, AAAU, IAU, commodity trader Adam Vincze wrote. “As gold’s market price has been capped by $2100/OZ since 2020, investors can not be fully assured that the new gold bull cycle has started until the market is convincingly stabilizing above this key resistance level,” he added.
On the energy side, natural gas prices fell more than 1%, while oil prices climbed after Iran deployed a warship to the Red Sea as tensions in the key trade route escalated following the U.S. sinking three Houthi boats over the weekend. Brent crude climbed above $78 a barrel after declining by 5% over the prior three sessions
Yemen’s Houthi rebels, backed by Iran, have been targeting ships in the Red Sea since Nov. as they support Palestinian militant group Hamas in the Israel war.
Both oil (CL1:COM) and natural gas (NG1:COM) prices were much lower in 2023 compared to 2022.
In the base metals market, copper prices in London advanced on hopes of stimulus in China, the world’s biggest metals consumer, and some improvement in factory activities in the country. Prices of metals were however, under slight pressure from a firmer dollar, making greenback-priced metals more expensive to holders of other currencies.
Elsewhere among agriculture commodities, soybean and wheat futures ticked up, while cocoa fell. The U.S. soybean crush likely eased slightly to 5.991 million short tons in November, or 199.7 million bushels, while soyoil stocks rose, according to analysts surveyed by Reuters ahead of a monthly U.S. Department of Agriculture (USDA) report.
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