Gold prices slightly up on Fed rate optimism

NEW YORK: Gold prices edged higher on Tuesday, as recovering expectations of a US rate cut in December weighed on the dollar and Treasury yields ahead of economic data that could offer further signals on the Federal Reserve’s policy trajectory.

Spot gold rose 0.2% to $2,644.79 per ounce, as of 1132 GMT, after falling as much as 1% on Monday. US gold futures gained 0.3% to $2,667.40.

“Several factors are influencing gold’s price action, including expectations of a Fed rate cut in December, the 10-year Treasury yield hovering near its lowest level since October, and sustained safe-haven demand,” said Ricardo Evangelista, senior analyst at ActivTrades.

Markets are pricing in a 73% probability of a 25-basis-point rate cut at the Dec. 17–18 meeting, up from 66% before Fed Governor Christopher Waller on Monday signalled support for a cut this month, citing inflation still forecast to fall to 2%.

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UBS said it expects the Fed to cut by 25 basis points in December, followed by another 100 bps of easing through 2025. The benchmark 10-year Treasury yield ticked up but was hovering around a 1-month low, making non-yielding bullion more attractive. The dollar was down 0.2%.

Investors will also be watching job openings data due at 1500 GMT, the ADP employment report on Wednesday, and Friday’s payrolls report. Gold, which does not pay any interest, historically performs well in low-interest rate environments and during periods of geopolitical uncertainty. In the Middle East, a US-brokered ceasefire between Israel and militant group Hezbollah faltered as strikes killed nine in southern Lebanon following Hezbollah’s attack on Israel’s Shebaa Farms on Monday.

“I anticipate gold prices to trade within a relatively narrow range, with resistance at $2,650 and support at $2,620,” Evangelista added. In other metals, spot silver added 1.39% to $30.93 per ounce, platinum rose 0.7% to $953.68 and palladium was up 0.9% at $990.27.