Gold Seeks Direction Amid Expectations of Interest Rate Cuts and a Strong Dollar
Gold futures are trying to find support at the end of a volatile month. The price of gold is currently up 0.3%, reaching $2,646.60 per ounce. The precious metal has increased on the expectation that the Federal Reserve will continue to cut interest rates in its December meeting. According to the CME FedWatch tool, the market is pricing in a 68% probability of a 25 basis point cut, up from about 56% last week. Low interest rates enhance the appeal of non-yielding assets like gold. However, the high inflation data released on Wednesday is seen as a potential obstacle to further rate cuts.
Gold prices rose above $2,645 on Thursday, erasing early losses as trading volumes eased due to the Thanksgiving holiday in the U.S. Gold, which has risen for three consecutive days, continued its recovery since Monday's decline, as investors looked for clues regarding the Fed's interest rate policy. Core Personal Consumption Expenditures (PCE) prices in October did not exceed market expectations, keeping alive the prospects of another rate cut by the Fed in December.
Despite the gain in gold’s value and its attractiveness to investors, some uncertainties remain. U.S. economic growth data was strong in the third quarter, personal income and spending were high in October, and unemployment claims remained low. These figures support investors' expectations that the Fed will take cautious steps in the coming year, with only 50 basis points of interest cuts expected by 2025.
Weaker trading volumes on Thursday, along with a slight recovery in the dollar, reduced gold demand. The dollar index rose to 106.30, recovering from a two-week low of 105.85 reached in the previous session. A 0.10% decrease seen in the SPDR Gold Trust indicates that short-term demand is under pressure. In the long term, macroeconomic uncertainties and potential changes in U.S. trade and monetary policies are thought to support demand for gold.
Domestically, the price of gram gold moved in parallel with the price of gold ounce and fell to the 2,900 TL threshold during the sharp drop at the beginning of the week. In the following days, gram gold partially continued its recovery, rising by 1.3% in the last three days to reach the 2,940 TL range. While gram gold showed a weekly decline of 2.7%, it has also retreated by a similar rate on a monthly basis. If gram gold closes November below 3,028 TL, it will complete its first month in the negative since September 2023.