Gold saw a small rise on Tuesday, even as investors slightly adjusted their expectations about U.S. rate cuts. This movement reflects a level of caution regarding the potential for the Federal Reserve to take a more aggressive approach to monetary easing in the upcoming policy meeting next year. Spot gold rose by 0.1% to $4,194.83 per ounce as of 0146. Gold futures in the U.S. for December delivery rose by 0.2%, hitting $4,223.60 per ounce.  The benchmark U.S. 10-year Treasury yields hit a 2-1/2-month high on Monday, with yields rising sharply after a major earthquake in Japan and as investors readied themselves for the forthcoming Federal Reserve policy announcement. Experts expect that the Fed will make a “hawkish cut,” as suggested by the wording of the statement, median forecasts, and Chair Jerome Powell’s press conference, indicating a higher bar for further rate cuts.

Data released on Friday did not change expectations about a possible easing of Fed policy. The Personal Consumption Expenditures Price Index showed that inflation met expectations, and there seemed to be a positive shift in U.S. consumer sentiment in December. Last week, private payroll data showed the largest drop in over two and a half years for November, while U.S. unemployment benefit claims decreased to 191,000 for the week ending November 29, reaching a low not observed in more than three years.

The market currently indicates an 87% likelihood of a 25-basis-point rate cut, down from 90% noted on Monday, in anticipation of the U.S. central bank’s policy meeting set for December 9-10, as per reports.

Reduced interest rates generally favor non-yielding assets such as gold. Morgan Stanley expects further increases in gold, driven by a weakening U.S. dollar, strong ETF buying, continuous central bank acquisitions, and sustained demand for safe-haven assets. Elsewhere, silver fell by 0.1% to $58.05 per ounce, platinum rose by 0.4% to $1,649.46, while palladium saw an increase of 0.6% to $1,473.32.