Gold prices traded around steady on Friday as they headed towards the end of their best year since 2020 at levels comfortably above $2,000 an ounce, buoyed by hopes the U.S. Federal Reserve could cut interest rates as soon as March.
Spot gold steadied at $2,061.89 per ounce by 10:25 a.m. ET (1525 GMT). U.S. gold futures, however, eased 0.6% to $2,071.10.
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Bullion has so far risen 13% in a year that saw prices swing between lows near $1,800 and a record high of $2,135.40.
"2023 has been a very volatile year for gold, as unexpected crises (the banking crisis in March, the Hamas attack to Israel in October) sparked strong price rallies and pushed gold to new records," said Intesa Sanpaolo economist Daniela Corsini.
Gold investors anticipate record-high prices next year, when the fundamentals of a dovish pivot in U.S. interest rates, continued geopolitical risk, and central bank buying are expected to support the market.
"To see higher levels, we need to see stronger demand from investors, such as a pickup in ETF inflows. For that weaker U.S. economic data and lower inflation is needed, so that the Fed sounds more dovish," UBS analyst Giovanni Staunovo said.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar.
The dollar index was headed for a more than 2% decline in 2023, while benchmark 10-year Treasury yields were languishing near their lowest levels since July.
Spot silver fell 0.4% to $23.83 per ounce, set to log a 0.5% yearly decline.
"We are positive about industrial demand, in spite of risks of a slowdown or even a mild recession in the U.S.," said Philip Newman, Metals Focus' Managing Director, seeing the silver market in a deficit for the foreseeable future.
Platinum fell 0.1% to $1,001.21, while palladium dropped 2.4% to $1,105.72. Both autocatalytic metals were on track for a yearly decline, with palladium down around 38% - its biggest drop since 2008.
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