Gold prices reached a two-week high on Tuesday, supported by the market’s anticipation of a third U.S. rate cut by the Federal Reserve next week and the escalating geopolitical tensions. The focus of the market then shifted to Wednesday’s US inflation data.
At 9:35 a.m. ET (1435 GMT), spot gold was trading at $2,687.69 per ounce, representing a 1.1% increase. The price of U.S. gold futures increased by 1% to $2,712.10.
“Safe haven bids are being encouraged by concerns regarding increased tensions in the Middle East,” stated Peter Grant, vice president and senior metals strategist at Zaner Metals.
“There is also a renewed emphasis on the global easing trend; the Bank of Canada is expected to reduce rates later this week, as will the ECB and SNB, and the Fed is expected to do so next week.”
The Federal Reserve’s rate-cut decisions will be significantly influenced by the U.S. Consumer Price Index (CPI), which is anticipated to increase by 0.3% in November, according to a Reuters poll, and the Producer Price Index (PPI), which are both scheduled to be released on Wednesday and Thursday.
“The impact of the CPI data on gold will be minimal, particularly if the print falls within the anticipated range.” Fawad Razaqzada, a market analyst at Forex.com, stated that the likelihood of rate cuts in early 2025 will be further diminished by a scorching CPI report.
According to the CME FedWatch tool, traders anticipate an 86% likelihood of an additional 25-basis-point reduction at the Federal Reserve’s December 17-18 meeting, following the two rate cuts already implemented this year.
Gold is regarded as a secure investment during periods of economic and geopolitical instability and is more likely to prosper in an environment with reduced interest rates.
On Monday, the Politburo of China was reported to have stated that the country will implement a more proactive fiscal approach and a “appropriately loose” monetary policy in the upcoming year.
Razaqzada further stated that any significant pronouncements should provide a boost to gold, as China is the world’s largest consumer nation. This is particularly true in the lead-up to the Lunar New Year celebrations, when jewelry demand for gift-giving increases.
Palladium was down 0.6% at $968.00, platinum was down 0.4% at $935.55, and spot silver was up 0.6% at $32.00 per ounce.
