Gold rises as traders “buy the fact” following news of Lebanon ceasefire

LONDON (November 27) Gold (XAU/USD) recovers into the $2,650s on Wednesday as traders “buy the fact” of the ceasefire deal brokered between Israel and Hezbollah after “the rumor” led to heavy selling on Monday. The two warring parties agreed on a 60-day ceasefire deal which has, so far, held, although sceptics say it will remain unsustainable without an end to hostilities in Gaza, according to Bloomberg News. 

Gold may also be rising from safe-haven flows due to other geopolitical hotspots. Reports from Ukraine suggest the frontline is becoming “as unstable as at the start of the war,” according to the UK’s Secretary of State for Defence, John Healy.   

A weaker US Dollar (USD) on Wednesday, meanwhile, may be providing Gold with a tailwind, given its negative correlation to USD.

In a busy day for markets, the precious metal could face volatility with the release of key US metrics covering growth, inflation, and the labor market, particularly if they revise the outlook for US interest rates, a key driver for Gold price. 

Gold rises as market bets increase of Fed cutting  

Gold might be further supported by the steady rise in the probability of the Federal Reserve (Fed) cutting interest rates at its December policy meeting, according to the CME FedWatch tool, which calculates probabilities based on the fluctuating price of 30-day Fed Fund interest rate futures. 

From determining about a 56% probability of the Fed cutting interest rates by 25 basis points (bps) (0.25%) at its meeting in December, at the start of the week, the CME tool now calculates the chances as 66.5%. The probability of the Fed not cutting interest rates at all has fallen from 44% to 33.5% over the same period. 

The increased chances of the Fed cutting interest rates is positive for Gold price as it lowers the opportunity cost of holding the non-interest-bearing asset, making it more attractive to investors. 

FXStreet