Speculation about Fed rate cuts is taking center stage
Investor attention is now firmly focused on the Federal Reserve, with several officials scheduled to speak this week. Markets are closely watching their comments to understand the likelihood of further rate cuts in December.
Traders currently see a 58.9% chance of a 25 basis point rate cut next month, compared to a 41.1% chance of rates remaining stable, according to CME’s FedWatch Tool. The Fed has already cut rates by 75 basis points since September, but strong US economic data has fueled uncertainty about whether the easing cycle will continue.
Geopolitical risks and the appeal of gold
Geopolitical tensions also provided a tailwind for gold. Russia launched its biggest airstrike on Ukraine in almost three months this weekend, with serious consequences for critical infrastructure. While geopolitical uncertainties often drive demand for safe havens like gold, analysts noted that recent gains have been driven primarily by US dollar dynamics and interest rate expectations.
The US labor market remains tight, although inflationary pressures have eased compared to 2022 and 2023. “Non-yielding assets like gold are thriving in a lower interest rate environment and amid geopolitical instability,” San Francisco Fed economists said in a recent report .
Short-term forecasting
Gold is on course towards $2,622, with $2,626.46 acting as the pivot. A breakout could test $2,644, while a bust risks $2,608 support. The Federal Reserve’s comments remain crucial to the price.