Gold Rally Continues as Dollar Weakens on December Rate Cut Speculation

TLDR

• Gold climbed 0.9% to $4,166.13 per ounce following weak US economic data that increased December Fed rate cut expectations
• September retail sales growth stalled and core producer inflation dropped more than forecast, showing continued economic slowdown
• Probability of a 25 basis point Fed rate cut on December 9-10 jumped to 80.7% from 42.4% one week ago
• US dollar index declined 0.5% from six-month highs, making gold more affordable for international buyers
• Silver approached record levels at $52.02 per ounce while platinum gained 0.2% to $1,559.90

Gold prices advanced during Wednesday’s Asian trading session as disappointing US economic data reinforced expectations for a Federal Reserve interest rate reduction in December. Spot gold increased 0.9% to $4,166.13 per ounce.

February gold futures rose 0.9% to $4,201.15 per ounce. The rally followed the release of September economic reports that showed weakness across multiple indicators.

September retail sales data revealed minimal expansion during the month. Core producer inflation contracted more sharply than economists had anticipated.

These September figures represent some of the final official economic data the Federal Reserve will review before its December policy meeting. The release of October employment and inflation statistics has been postponed due to an extended government shutdown.

The Commerce Department’s Bureau of Economic Analysis moved the PCE price index release date to December 5. This index represents the Fed’s primary inflation measurement tool.

Market Pricing Shows Rate Cut Confidence

Trader expectations for a December rate reduction have grown considerably over the past seven days. Two Federal Reserve officials recently expressed support for additional monetary policy easing in the near term.

CME Fedwatch data indicates markets now see an 80.7% likelihood of a 25 basis point rate cut at the Fed’s December 9-10 meeting. This marks a substantial jump from the 42.4% probability assigned just one week prior.

The US dollar index dropped 0.5% from the near six-month peak reached in the previous week. The index measures dollar strength against a basket of major international currencies.

Lower interest rates generally support gold because they diminish returns on yield-bearing investments like government bonds. Since gold generates no income, it becomes relatively more attractive when alternative investment yields decrease.

A declining dollar benefits gold through multiple channels. Dollar-denominated commodities become cheaper for purchasers using foreign currencies.

Precious Metals Rally Across the Board

Other precious metals recorded gains alongside gold on Wednesday. Spot silver climbed 1% to $52.0215 per ounce, nearing all-time high levels. Spot platinum advanced 0.2% to $1,559.90 per ounce.

Safe-haven demand for gold remained strong even as broader risk assets rallied during the week. Persistent tensions between Japan and China supported continued interest in protective assets.

Uncertainty surrounding a potential Russia-Ukraine ceasefire added to haven demand. Concerns about stretched fiscal spending in major economies also contributed to gold’s appeal.

Industrial Metals and Central Bank Activity

Industrial metals also showed strength during the trading session. Benchmark copper futures on the London Metal Exchange increased 0.3% to $10,992.90 per tonne.

Copper received a boost from Chilean mining company Codelco, which signaled plans to raise prices for its Chinese customers. Chile ranks as one of the world’s largest copper producers.

Central banks in emerging market nations have continued systematic gold acquisition programs. These purchases form part of broader strategies to diversify foreign currency reserves.

The buying reflects structural portfolio management objectives rather than short-term market timing decisions. This consistent institutional demand provides underlying price support for gold markets.

The PCE price index data, originally scheduled for earlier release, will now come out on December 5. This timing places the inflation report just days before the Fed’s December policy decision.

The post Gold Rally Continues as Dollar Weakens on December Rate Cut Speculation appeared first on Blockonomi.