Pedro Goncalves writes:
Gold prices rose modestly on Monday morning as the US dollar remained steady, just below a three-month high reached the previous week. However, reduced expectations for additional Federal Reserve rate cuts in December and the easing of US-China trade tensions capped any significant upward movement in the precious metal.
Gold futures rose 1% to $4,036.00 per ounce, while spot gold gained 0.4% to $4,020.57 an ounce, at the time of writing.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was flat at 99.80.
“It’s more of positioning from the U.S. dollar side, given that dollar strength has started to stabilise in today’s Asia session, so that has caused a bit of uptick in gold,” OANDA senior market analyst Kelvin Wong said.
The US Federal Reserve reduced interest rates by 25 basis points last week, marking the second rate cut this year. However, hawkish comments from Fed Chair Jerome Powell afterwards have tempered expectations for further cuts in 2025.
Traders now assign a 71% probability to a rate cut in December, down from more than 90% before Powell’s remarks, according to CME’s FedWatch Tool. Non-yielding gold tends to perform well in low-interest-rate environments and during periods of economic uncertainty.
However, Wong noted that “safe-haven play has been reduced at this point in time, over the de-escalation of US-China trade tensions. It could also be a rotation towards a much more risk-on play in the equities… that is causing lack of (major) upward momentum in gold.”