Investing.com-- Gold prices kept to a tight range in Asian trade on Wednesday after rising optimism over early interest rate cuts by the Federal Reserve drove a strong melt-up in prices through December.

The yellow metal blew past key levels in recent sessions, and was now trading less than $100 below a record high hit at the beginning of the month. Gold’s recent rally was triggered by the Fed signaling it was done raising interest rates, and that it will trim lending rates in 2024.

But markets bet that the Fed will cut interest rates by as soon as March 2024, especially as recent data showed sustained cooling in U.S. inflation.

Spot gold steadied at $2,064.84 an ounce, while gold futures expiring in February rose 0.3% to $2,075.85 an ounce by 01:14 ET (06:14 GMT).

Gold set for strong gains in 2023 on rate cut hopes

Gains in December put gold prices on course to rise between 12% to 14% in 2023.

But the yellow metal still lagged most risk-driven assets, particularly stocks, given that U.S. interest rates remained high. By comparison, the S&P 500 was set to add about 24% in 2023.

Still, the yellow metal stands to benefit further in 2024, especially as U.S. interest rates decrease and as global economic conditions deteriorate. While the U.S. economy has remained somewhat resilient, other parts of the world- such as the euro zone and China- are grappling with a sustained slowdown in growth.

The Fed is widely expected to trim interest rates between three to five times in 2024, with markets betting that the first of the expected rate cuts could come by as soon as March 2024.

High interest rates push up the opportunity cost of investing in gold- a trend that had limited any major gains in the yellow metal through most of 2023.

Increased safe haven demand- amid signs of a potential escalation in the Israel-Hamas war- could also potentially increase safe haven demand for the yellow metal.

Copper prices advance, set for mild gains in 2023

Among industrial metals, copper prices rose on Wednesday, extending recent gains as weakness in the dollar buoyed most commodity prices.

Copper futures expiring March rose 0.5% to $3.9223 a pound.

Despite logging a strong rebound in December, copper prices were still set for only mild gains in 2023- about 3%- as concerns over an economic slowdown in top importer China battered prices.

Copper prices had fallen to as low as $3.5195 a pound earlier this year.

But the red metal is potentially set for a strong rebound in 2024. Increasing demand for electric vehicles, coupled with a global push into green energy, is expected to ramp up consumption of the red metal, which is a key component in battery and electric technology.