Spot gold was nearly 0.1% higher at $2,068.59 per ounce, and was on track to mark a more than 13% gain this year – its best since 2020, while U.S. gold futures added 0.5% to $2,079.90 per ounce

Gold prices rose on Wednesday, hovering near their highest in almost three weeks, on market expectations the Federal Reserve will start cutting interest rates in Q1 2024.

Spot gold was nearly 0.1% higher at $2,068.59 per ounce, as of 0934 GMT, and was on track to mark a more than 13% gain this year – its best since 2020.

U.S. gold futures added 0.5% to $2,079.90 per ounce.

There are a lot of ifs and buts, permutations and combinations, but the fact remains that no matter what, the Fed’s not going to raise the rates again, it is the base case scenario for gold, according to Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai.

Raising rates is out of question as per us and with things improving gradually, market is starting to price in rate cuts, he said.

A report from the U.S. Commerce Department on Friday showed underlying inflation pressures continuing to ease.

The cooler U.S. inflation data ascertained analyst expectations of a rate cut by the Federal Reserve in March, with traders now pricing in around an 80% chance, shows the CME FedWatch tool.

Helping bullion prices, the dollar index was holding near a 5-month low, and eyed its worst yearly decline since 2020, down nearly 2% for the year so far.

A softer dollar makes gold more attractive for other currency holders.

Spot silver dropped 0.4% to $24.09 per ounce, and was poised for a marginal gain of around 0.5% over the year.

Platinum advanced 0.2% to $980.18. Palladium gained 1.5% to $1,192.12. Both were on track to log yearly decline, with palladium dropping nearly 34% so far for the year – its worst since 2008.