Gold fell below the $4,000 per ounce level once more on Tuesday, as the dollar held firm at over three-month highs. The reduced likelihood of another U.S. interest rate cut in December, along with easing U.S.-China trade tensions, has dampened demand for bullion. Spot gold fell by 0.4% to $3,983.87 per ounce, as of 0047. U.S. gold futures for December delivery decreased by 0.5%, closing at $3,994.10 per ounce. The dollar rose to a three-month high against the euro, continuing its upward trend from last week amid uncertainties about the likelihood of another rate cut by the U.S. Federal Reserve this year. The Fed last week implemented a second interest rate cut this year; however, Chair Jerome Powell indicated that an additional reduction this year is “not a foregone conclusion.”
Market participants currently assign a 65% probability to the Federal Reserve implementing a rate cut in December, a decrease from the previous estimate of over 90% prior to Powell’s comments, according to the reports. On Monday, Fed officials continued to express differing views on the economy, a conversation that is likely to intensify as the Fed’s December policy meeting draws near, especially given the absence of key data, which is currently inaccessible due to the federal government shutdown. Investors are eagerly awaiting the upcoming release of ADP U.S. employment data set for Wednesday, as well as the ISM PMIs anticipated later this week.
Non-yielding gold generally does well in situations marked by low interest rates and heightened economic uncertainty. Bullion reached an unprecedented peak of $4,381.21 on October 20, yet has since dropped by nearly 10%. On Thursday, U.S. President Donald Trump announced that he had come to an agreement with Chinese President Xi Jinping to lower tariffs on China, depending on Beijing’s efforts to tackle the illegal fentanyl trade, the revival of U.S. soybean imports, and the continuation of rare earths exports.
Meanwhile, China has ended a lengthy tax exemption policy for specific gold retailers as of Saturday, which could impede the current gold buying boom in the largest consumer market worldwide. Elsewhere, spot silver decreased by 0.3% to $47.95 per ounce, while platinum experienced a modest increase of 0.1% to $1,566.60, and palladium saw a decline of 0.8% to $1,433.50.