Gold at 1-month low after Fed flags slower rate cut pace next year

Gold prices languished near a one-month low on Thursday after the U.S. Federal Reserve indicated it would slow the pace of its monetary policy easing cycle next year, lifting the dollar and Treasury yields.

FUNDAMENTALS

* Spot gold were little changed at $2,588.80 per ounce as of 0008 GMT, after dropping more than 2% overnight to hit its lowest since Nov. 18. U.S. gold futures were down 1.9% to $2,602.70.


* The Fed cut rates by 25 basis points to the 4.25%-4.50% range and its summary of economic projections (SEP) indicated it will make rate cuts totaling a half percentage point by the end of 2025.

* Fed Chair Jerome Powell said that Fed policymakers want to see more progress on bringing inflation down as they consider the path of future rate cuts, as inflation has exceeded year-end projections.

* The dollar index rose to its highest level in two years after the rate cut decision from the Fed, making gold more expensive for other currency holders, while U.S. Treasury yields surged.

* Markets now expect the Fed to leave its benchmark overnight rate unchanged at the Jan. 28-29 policy meeting. Higher rates reduce the appeal of holding the non-yielding asset.

* Traders now looked forward to key U.S. GDP and Core Personal Consumption Expenditure data due later this week for more cues on monetary policy.

* Meanwhile, the Hong Kong Monetary Authority (HKMA) cut its base interest rate charged via the overnight discount window by 25 basis points to 4.75%, tracking the move by the Fed.

* The Indian government is re-examining a surge in gold imports that widened the country's trade deficit to a record in November and pushed the rupee to an all-time low, two government sources aware of the matter told Reuters.

* SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings fell 0.03% to 863.90 metric tons on Wednesday.

* Spot silver was steady at $29.37 per ounce, platinum was down 0.4% to $915.45 and palladium eased 0.2% to $901.30.

DATA/EVENTS (GMT) 0745 France Business Climate Mfg Dec 0745 France Business Climate Overall Dec 1200 UK BOE Bank Rate Dec 1330 US GDP Final Q3 1330 US Initial Jobless Clm 14 Dec, w/e 1330 US Philly Fed Business Indx Dec 1500 US Existing Home Sales Nov

Japan JP BOJ Rate Decision 19 Dec.