Weekly market recap

The gold price also reacted negatively to the U.S. Federal Reserve’s plan for fewer interest rate cuts in 2025 than markets had anticipated. This strengthens the U.S. dollar, causing gold prices to fall and hit a one-month low on Wednesday. Higher interest rates exert downward pressure on gold by increasing the opportunity cost of holding it, making gold less attractive compared to interest-bearing assets. Another factor weighing on gold is the expected lower demand for physical gold in India, one of the world’s largest gold consumers. Despite these factors, gold has appreciated by more than 27% in 2024, marking its best annual performance since 2010.

U.S. natural gas has also had an exceptional year, with prices rising over 70% since the start of the year, partly due to the initially low price base. On Friday, U.S. natural gas prices reached their highest level in over a year, surpassing $3.7 per MMBtu. The main drivers of this increase are expectations of higher global demand and cold weather in the U.S. In the first case, European countries are increasingly likely to limit gas imports from Russia, leading U.S. producers to prioritize higher-priced exports over domestic sales. Additionally, colder U.S. weather has boosted demand while reducing gas inventories, which fell by more than 100 billion cubic feet for the second consecutive week, according to the EIA.

The most closely watched event of the past week was the FOMC meeting, the interest rate decision, and the subsequent press conference. The announcement of the third rate cut this year surprised no one, as a 25bp cut had been widely expected. However, much more attention was drawn to the press conference, where Jerome Powell noted that policymakers’ forecasts for core inflation in 2025 had risen to 2.5% from September’s 2.2%. According to Powell, the central bank will adopt a more cautious approach to future rate decisions, with most policymakers anticipating only two rate cuts in 2025.

On Thursday, the Commerce Department reported that the U.S. economy grew at an annualized rate of 3.1% in the third quarter, exceeding the previous estimate of 2.8%. Retail sales increased by 0.7% in November, up from 0.5% in October, and employment data was also positive, with the Labor Department reporting initial jobless claims of 220,000, down from the previous week.

The Core PCE Price Index, the Fed’s preferred measure of underlying inflation, rose by 0.1% from the previous month in November, below market expectations (+0.2%; previous +0.3%) and marking the smallest increase since May. Year-over-year, it rose by 2.8% in November, consistent with October’s reading and slightly below consensus expectations.

In the UK, the Bank of England (BoE) kept its key interest rate unchanged at 4.75%, as expected. Annual headline inflation accelerated to 2.6% in November, up from 2.3% in October, driven by higher gasoline and clothing costs.