Inflation and Fed rate speculation drive demand for gold
The US dollar hit its highest level since October 2023, buoyed by expectations that inflation risks could dampen the pace of Federal Reserve rate cuts. According to the CME FedWatch Tool, traders now expect a 55% probability of a 25 basis point rate cut in December.
Chicago Fed President Austan Goolsbee highlighted progress toward the Fed’s 2% inflation target, but also stressed the need to slow interest rate cuts. New York Fed President John Williams also noted a balanced labor market, easing inflationary pressures but maintaining cautious optimism.
Meanwhile, US Treasury yields remain high, reinforcing gold’s appeal as a hedge against inflation and economic uncertainties.
Economic data paints a mixed picture
U.S. jobless claims fell by 6,000 last week to 213,000, the lowest in seven months, while existing home sales rebounded for the first time since 2021.
However, the Philly Fed Manufacturing Index posted a surprising contraction in November, underscoring continued volatility in economic performance. Investors now await Friday’s flash PMIs for further insights.
Geopolitical tensions are driving greater demand for safe havens
Increased tensions between Russia and Ukraine are creating additional demand for gold. Recent rocket exchanges have increased uncertainty in global markets, causing investors to turn to gold as a risk-averse asset.