Spot Gold extended gains to an over one-week high of $4,155.90/oz. on Tuesday, as remarks by Federal Reserve policy makers renewed prospects of an interest rate cut next month.
Fed Governor Christopher Waller said on Monday that the US job market was weak enough to warrant another 25 basis point rate cut in December. Yet, policy action beyond that will depend on upcoming macro data that has been delayed by the government shutdown.
Waller’s remarks followed dovish comments by New York Fed President John Williams last week. He said that a near-term rate cut remained possible, with labor market weakness posing a higher risk than elevated inflation.
Markets are now pricing in about an 81% chance of a 25 basis point Fed rate cut in December, compared to a 50% chance a week earlier.
“(Gold is primarily being) driven by expectations of a rate cut … in the last two weeks and since expectations shot up (rapidly), it caused gold prices to recover in the short term,” OANDA senior market analyst Kelvin Wong was quoted as saying by Reuters.
“Market participants will be viewing any demand-related U.S. economic data, with much more interest right now to see whether the Fed’s concerns regarding a softer demand situation, could be labor market, retail sales, or consumer confidence, outweigh the so-called sticky inflation situation.”
Spot Gold was last up 0.15% on the day to trade at $4,140.22 per troy ounce.
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