Gold Prices Rise Amid Growing Expectations of a US Interest Rate Cut

Global gold markets saw a significant price increase, with gold reaching $4,169 per ounce on Wednesday before retreating slightly to settle near $4,150, its highest level in almost two weeks.

Economic Drivers of the Rise

This rise comes amid growing expectations that the US Federal Reserve will cut interest rates in December, following the release of delayed US economic data that reinforced these expectations.

The latest data indicated a clear slowdown in consumer spending, with retail sales rising by only 0.2% in September, after a strong increase in August, suggesting a decline in consumer spending.

Producer price data also showed stable inflationary pressures, generally in line with market expectations.

Federal Reserve Officials' Support

This trend is supported by several statements from Federal Reserve officials expressing their support for an interest rate cut next month due to deteriorating labor market indicators.

Federal Reserve member Stephen Miran stated on Tuesday that the deteriorating labor market warrants further interest rate cuts, echoing Christopher Waller's remarks on Monday.

Market Expectations

Financial markets currently estimate an 83% probability of a 25-basis-point interest rate cut at the upcoming meeting.

Gold, as a non-yielding asset, benefits from a low interest rate environment, becoming more attractive to investors, particularly during periods of geopolitical and economic instability.

Obstacles to Upside

Despite this optimism, several factors could limit gold's future gains. The most prominent is the easing of geopolitical tensions following the agreement by Ukrainian officials on a plan to end the war with Russia, which reduces demand for safe-haven assets like gold.

Investors are awaiting further economic data and statements from Federal Reserve officials to determine the future direction of global gold markets.