Gold prices edged higher on Friday, January 17, and were on track for a third consecutive week of gains as US economic data this week fueled expectations that the Federal Reserve might continue easing interest rates in 2025.
As of 0047 GMT, spot gold was steady at $2,715.21 per ounce, holding near a one-month high reached on Thursday. The metal has gained about 1% this week. US gold futures dipped 0.1% to $2,747.50.
Fed Rate Cut Expectations Boost Gold
Federal Reserve Governor Christopher Waller suggested that three or four rate cuts remain possible this year if US economic data continues to weaken. The central bank’s stance shifted following a CPI report on Wednesday, indicating that inflationary pressures are easing. As a result, market expectations have grown that the Fed may pause its rate hikes and possibly cut rates further.
At its upcoming policy meeting from January 28 to 29, the Fed is expected to keep the benchmark rate in the 4.25% to 4.5% range, which has been supportive for gold. Higher interest rates typically reduce the appeal of gold as a non-yielding asset, but the prospect of easing boosts its attractiveness.
Weaker US Data Supports Gold
US economic data this week, including retail sales and initial jobless claims, also put pressure on Treasury yields and the US dollar, further supporting gold. Richmond Fed President Thomas Barkin noted that inflationary pressures are continuing to ease, adding to the market’s expectations of a less aggressive Fed stance in the near term.
However, concerns about the potential tariffs under the incoming Donald Trump administration remain. There are worries that new tariffs could further stoke inflation, which could affect the US economy and gold’s role as an inflation hedge.
ETF Holdings Decline
Despite the positive price action for gold, holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), fell 0.43% to 868.78 tonnes on Thursday from 872.52 tonnes on Wednesday, suggesting some outflows from the ETF.
Other Precious Metals
Spot silver rose 0.1% to $30.82 per ounce, adding over 1% for the week. However, palladium and platinum both faced slight declines. Palladium eased 0.1% to $937.25, and platinum shed 0.1% to $931.85. Both metals were set for weekly losses.
Conclusion
Gold prices continue to benefit from a dovish Fed outlook and weaker economic data. With inflationary pressures showing signs of easing, traders are betting on further rate cuts, which support gold’s safe-haven appeal. However, uncertainty surrounding potential tariffs and economic policy changes remains a risk. As the week wraps up, gold is positioned for solid gains, marking a strong start to the year.