BENGALURU: Gold prices were on track for a weekly jump, driven by a weaker US dollar and lower Treasury yields, after the Federal Reserve indicated lower borrowing costs next year.

Spot gold, which edged up 0.2% at $2,040.50 per ounce by 1153 GMT, has risen 1.9% so far this week. US gold futures gained 0.6% to $2,056.40.

“Given the premature spike in early December, traders and investors are likely to be more reluctant to jump on another fear of missing out rally,” said Ole Hansen, Saxo Bank’s head of commodity strategy. “A fresh record is most certainly achievable in 2024.”

Fed Chair Jerome Powell said on Wednesday the tightening of monetary policy is likely over, with a discussion of cuts in borrowing costs coming “into view,” an outlook affirmed by 17 of 19 policymakers. Markets are pricing in around a 75% chance of a rate cut in March, CME FedWatch tool showed.

Commerzbank in a note said the upcoming interest rate cuts speak in favor of gold, adding it expects prices at $2,150 in the second half of next year. Lower US interest rates increase the appeal of non-yielding bullion. The dollar was headed for a weekly drop, making gold cheaper for other currency holders, while the benchmark 10-year bond yield hovered near its lowest level since July.

However, the European Central Bank on Thursday pushed back against bets on imminent interest rate cuts, reaffirming that borrowing costs would remain at record highs despite lower inflation expectations. Silver firmed 0.3% to $24.2 per ounce, while platinum gained 0.4% to $961.47. Both metals were also poised for weekly gains.

Meanwhile, palladium rose 3.6% to $1,141.41 and was headed for its best week since March 2022. Prices had touched a five-year low earlier this month. “The bounce (in palladium) is being accelerated by short covering from funds who have played palladium with a short bias all year,” Hansen added.