Gold has experienced an upward movement on Tuesday following indications from certain Federal Reserve speakers that they may be inclined to support an interest rate cut in December. This development has led to an increase in the likelihood of such a rate reduction, which in turn has provided a boost to the precious metal.
The probability of a rate cut was further enhanced by the comments of Fed Governor Christopher Waller, who expressed his leaning “toward supporting a cut in December.” New York Fed President John Williams, while more cautious, also acknowledged the need for further rate cuts considering the more balanced risks to inflation and employment. Atlanta Fed President Raphael Bostic, too, signaled an openness to a rate cut in December, citing the balanced risks to the labor market and inflation.
Concurrently, gold is also finding support from elevated geopolitical risks. The ongoing conflicts in the Middle East, including the intensification due to the civil war in Syria and the Russia-Ukraine conflict, along with the political crisis in France, have driven investors to seek the safety of gold. During times of such crises, gold has traditionally been a favored haven asset.
Technically, gold (XAU/USD) is trading in the $2,640s and appears to be on the verge of potentially extending a wave c lower as it nears the completion of a three-wave pattern. The precious metal has been moving along a major trendline within an overall range-bound market, and the formation of a three-wave Measured Move pattern seems to be taking shape.
In addition to the Fed speakers’ remarks, better-than-expected US Purchasing Manager Index (PMI) data for November has also contributed to the market’s bets on a 25-basis-point rate cut by the Fed. The CME FedWatch tool now calculates the probability of such a scenario at 72.5%, up from the mid-60s previously.
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