Gold prices remain stable as markets anticipate a 'hawkish' Federal Reserve stance.
Gold prices remained steady on Tuesday, as investors had already factored in a Federal Reserve rate cut. However, they were also on edge, awaiting signals from the U.S. central bank's two-day policy meeting, which began later that day, indicating a potential milder easing cycle than expected.
Spot gold prices held firm at $4,189.17 per ounce at 0444 GMT. December gold futures were flat at $4,218.50 per ounce.
OANDA's senior market analyst, Kelvin Wong, attributed this to investors' strategic repositioning ahead of the Federal Reserve's policy meeting. He noted that earlier in the month, Powell had signaled a hawkish approach to rate cuts during his press conference, prompting U.S. Treasury market investors to adjust their positions.
The benchmark U.S. 10-year Treasury yields reached a 2-1/2-month peak on Monday.
Analysts predict a 'hawkish cut' this week, accompanied by guidance and forecasts that suggest a high threshold for further easing into next year. Recent data showed that the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, met expectations, while consumer sentiment improved in December.
Despite a sharp drop in private payrolls for November, jobless claims fell to a three-year low for the week ending November 28.
Markets currently assign an 89% probability of a quarter-point cut at the Fed's December 9-10 meeting, according to CME's FedWatch Tool. Lower interest rates typically benefit non-yielding assets like gold.
In contrast, silver prices rose 0.2% to $58.24 per ounce, not far from the record high of $59.32 achieved on Friday. Wong explained that silver is currently a higher-beta play among precious metals, with low inventories, strong industrial demand, and expectations of Fed rate cuts driving its momentum and pushing it into a risk-on mode, outperforming gold.
Platinum gained 0.4% to $1,649.10, while palladium added 0.7% to $1,475.38.
