Gold holds below $4,100 despite rising hopes for rate reduction

Gold (GC=F) futures opened at $4,069.20 per ounce on Monday, down 0.3% from Friday’s close of $4,079.50. The price of gold has remained below $4,100 since Nov. 19.

The near-term interest-rate outlook continues to influence demand and pricing for the yellow metal. Traders currently predict a 73.5% chance the Fed will lower rates by a quarter-point in December, according to CME FedWatch. The chances increased after New York Fed President John Williams spoke last week, expressing support for another rate reduction. However, the Fed will have to make its decision without current jobs data. The Bureau of Labor Statistics canceled the October jobs report and delayed the November release until Dec. 16. The Fed meets on Dec. 9 and 10.

Interest rates affect gold demand because the precious metal competes with yield-bearing assets for investor dollars. When interest rates fall, cash deposits earn less and gold ­— which doesn’t pay interest — looks more attractive by comparison.

The opening price of gold futures on Monday was down 0.3% from Friday’s close. Here’s a look at how the opening gold price has changed versus last week, month, and year:

One week ago: 0%

One month ago: -1.2%

One year ago: +51.4%

On Nov. 14, gold’s one-year gain was 63.4%.

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The price of gold can be quoted in multiple forms because the precious metal is traded in different ways. The two main gold prices investors should know about are spot prices and gold futures prices.

Learn more: How to invest in gold in 4 steps

The spot price of gold is the current market price per ounce for physical gold as a raw material, sometimes called spot gold. Gold ETFs that are backed by physical gold assets generally track the gold spot price.

The spot price is lower than what you’d pay to buy gold coins, bullion, or jewelry, since your total price will include a markup called the gold premium that covers refining, marketing, dealer overhead, and profits. The spot price is more like a wholesale price, and the spot price plus the gold premium is the retail price.

Learn more: Thinking of buying gold? Here’s what investors should watch for.

Gold futures are contracts that mandate a gold transaction at a specific price on a future date. These contracts are exchange-traded and more liquid than physical gold. They settle on the contract expiration date or earlier, either financially or via delivery. A financial cash settlement involves paying the contract’s profit or loss in cash. Delivery means the seller sends physical gold to the buyer for the contracted price.

Supply and demand determine gold spot prices and gold futures prices. Factors that influence gold supply and demand include:

Geopolitical events

Central bank buying trends

Inflation

Interest rates

Mining production

Learn more: Who decides what gold is worth? How prices are determined.

Whether you’re tracking the price of gold since last month or last year, the price-of-gold chart below shows the precious metal’s steady upward climb in value.