Gold retreats from 6-week high on profit-taking
Gold prices fell on Tuesday, hitting a low of $4,200 an ounce and currently trading near $4,210 an ounce. Prices retreated after reaching a six-week high on Monday, driven by profit-taking as traders awaited the US Federal Reserve meeting next week.
This move comes as expectations for a US interest rate cut have reached an 87% probability of a 25-basis-point reduction, supported by continued weak economic data and comments from Fed officials.
Weak US economic data
Data released on Monday showed the US manufacturing sector contracted for the ninth consecutive month in November, increasing pressure on the US central bank to ease its monetary policy to support economic growth.
Fed leadership change expected
Speculation intensified after President Trump announced on Sunday that he had chosen a successor to current Federal Reserve Chairman Jerome Powell. Although no official announcement has been made regarding the nominee, speculation points to Kevin Hassett, who is seen as a proponent of lower interest rates.
The Federal Reserve's Decision to Halt Balance Sheet Reduction
The US central bank officially announced today the end of its quantitative tightening program, effective December 1, 2025. This means halting the withdrawal of liquidity from the markets and fixing the balance sheet size at approximately $6.57 trillion.
Market Expectations and Key Indicators
Analysts anticipate that gold prices may experience volatility in the coming period, particularly with the following events:
- The upcoming Federal Reserve meeting and its interest rate decisions (next week)
- ADP employment data for November (tomorrow)
- Personal consumption expenditures (PCE) data for September (next Friday)
It's worth noting that gold is considered a safe haven investment during times of economic uncertainty, and central bank decisions, especially those of the US Federal Reserve, directly influence its price movements.
Today’s decline in gold reflects normal profit-taking after strong gains, with traders focusing on upcoming US economic indicators and the Fed’s expected decision to cut interest rates to support the US economy, making a return to higher prices the preferred option for the market.
We expect it to reach a peak this week, followed by levels of $4350 per ounce.
