Gold edges higher after Fed speakers talk up Christmas interest-rate cut
LONDON (December 3) Gold (XAU/USD) edges higher to trade in the $2,640s on Tuesday after commentary from Federal Reserve (Fed) speakers led to an uptick in the probabilities of the Fed cutting interest rates at its December policy meeting. Lower interest rates are positive for Gold because they reduce the opportunity cost of holding the non-interest paying asset.
Elevated geopolitical risks could also be underpinning Gold amid continued conflict in the Middle East intensified now by the outbreak of civil war in Syria, the Russia-Ukraine conflict, and political risk in France. During times of crisis, investors turn to Gold for safety.
Gold edges higher on Christmas-Fed-cut hopes
Gold is drifting higher on Tuesday after comments from several Fed members appeared to lean in favor of the central bank cutting US interest rates at their December meeting.
Fed Governor Christopher Waller said on Monday that he was leaning “toward supporting a cut in December.”
His colleague, New York Fed President John Williams, though more cautious, said that further cuts to interest rates were needed as risks to inflation and employment were more balanced. Still, he added: “one could argue a case for skipping a rate cut in December, (I) will be watching data closely to decide.”
Yet he went on to say, “policy is restrictive enough that a December cut still allows ample scope to slow (the) pace of cuts later if needed.”
Atlanta Fed President Raphael Bostic, meanwhile, said on Monday that he was “keeping his options open” regarding a cut in December. However, he too appeared to lean in favor of such a move, adding that since the risks to the labor market and inflation were “roughly in balance, we likewise should begin shifting monetary policy toward a stance that neither stimulates nor restrains economic activity.”
Their comments, as well as better-than-expected US Purchasing Manager Index (PMI) data for November, increased market bets the Fed will cut interest rates by 25 basis points. On Tuesday, the CME FedWatch tool calculates the probability of such a scenario at 72.5% (from the mid 60s previously).
FXStreet
