Gold prices exhibited stability above the crucial $2,000 mark on Wednesday, driven by widespread expectations of interest rate cuts by the Federal Reserve in the coming year. As investors eagerly anticipated U.S. inflation figures scheduled for later in the week, the precious metal held its ground.

spot gold maintained its position at $2,040.69 per ounce, while U.S. gold futures experienced a marginal 0.1% increase, reaching $2,053.90. Analyst Giovanni Staunovo from UBS noted that the market, following a significant move, currently operates in a cautious “wait and see” mode, potentially influenced by reduced activity during the approaching holiday period.

Staunovo emphasized that market participants are closely monitoring data influencing the Federal Reserve’s monetary policy, such as inflation and job data. The upcoming release of the November core personal consumption expenditure (PCE) index report, considered the Fed’s preferred gauge of underlying inflation, on Friday is expected to provide crucial insights.

The Federal Reserve’s recent signal of the conclusion of its tightening phase and the possibility of rate cuts in 2024 has been a key driver for gold. Chicago Fed Bank President Austan Goolsbee highlighted that future decisions regarding interest rates hinge on substantial progress in combatting inflation.

However, some Fed officials have expressed reservations about the market’s aggressive expectations for rate cuts. Staunovo pointed out that comments from these officials, suggesting the market’s expectations might be overly optimistic, have contributed to limiting the upward momentum of gold prices.

Lower U.S. interest rates enhance the attractiveness of gold for investors, and currently, market indicators are pricing in approximately a 75% chance of a rate cut in March, according to the CME FedWatch tool.

Independent analyst Ross Norman forecasted a continued firm tone in the near term for gold but suggested that a significant challenge to the upside might be deferred until early 2024. In the broader metals market, spot silver recorded a modest 0.1% increase, reaching $24.04 per ounce, while platinum showed a 0.2% uptick to $956.47. Palladium, in contrast, experienced a 1.4% decline, settling at $1,206.62.