Gold prices increased as traders bet that the US Federal Reserve (FED) will cut interest rates next month, amid signs of a weakening US labor market.
FED Governor Christopher Waller has highlighted expectations on Monday when he expressed his support for a rate cut at the upcoming meeting. New York Fed President John Williams also made a similar statement last Friday, saying the possibility of a short-term rate cut remains unanswered.
Although the December Fed meeting is seen as the next milestone for the market, investors are now relying on old economic data, as the temporary US government shutdown has delayed the release of statistics.
According to traders, the probability of the FED cutting interest rates at its policy meeting on December 9-10 has increased to nearly 80%.
However, the Fed's policymakers are deeply divided on whether to continue cutting interest rates after two consecutive cuts in September and October.
In the context of low interest rates, gold often benefits from not bringing in yields, causing the opportunity cost of holding this precious metal to decrease compared to other profitable assets.
Traders are awaiting a series of delayed economic data due this week, including September retail sales and the Producer Price Index (PPI) due on Tuesday, along with unemployment claims on Wednesday.
September retail sales figures are expected to show a cooling in consumption, as Americans continue to be pressured by rising prices. Meanwhile, the unemployment data of the November survey week is considered particularly important, as the Fed is currently relying on alternative indicators in the context of a lack of official jobs reports due to the US Government's temporary closure.
Strategist Ahmad Assiri of Pepperstone Group Ltd. commented: The current rate cut roadmap is quite unpredictable and very close, so gold prices are likely to continue to fluctuate around the current range. I do not see the possibility of major fluctuations in the short term, but instead it is an ideal period for two-way transactions in a less volatile environment".
The precious metal is currently in the accumulation phase, after soaring to a record high of more than $4,380/ounce in October. Since the beginning of the year, gold prices have increased by about 56%, supported by increased trade and geopolitical tensions, along with concerns about worsening financial prospects in many countries.
As of 4:59 p.m. in New York, spot gold prices increased by 1.7%, to $4,134.48/ounce. Bloomberg Dollar spot Index is almost flat. Silver, platinum and palladium prices all increased slightly.
On the London Stock Exchange (LME), the price of copper futures has remained largely unchanged, closing at 10,773 USD/ton, while most other base metals have increased slightly.
