The precious metal’s rally has paused after breaking new record highs this week, reflecting the cautious stance of the market ahead of the Fed’s key announcement.
Recent economic indicators have painted a picture of a resilient US economy, which is likely to influence the Fed's decision-making process.
The U.S. Commerce Department reported Tuesday that U.S. retail sales rose 0.1% in August, after rising 1.1% in July. The data was better than expected, as economists had predicted a 0.2% decline.
Retail sales rose 2.1% over the past 12 months, the report said.
Core sales, which exclude auto sales, rose 0.1% in August, following a 0.4% gain in July. The data missed expectations, as economists were expecting a 0.2% gain.
Notably, the gold market has seen some fresh selling pressure as it remains near its recent all-time high above $2,600 an ounce. December gold futures were last trading at $2,598 an ounce, down 0.42% on the day.
Gold is under some selling pressure as there is still much uncertainty surrounding the upcoming easing cycle of the US Federal Reserve (FED), according to some analysts.
Economists note that economic data shows the US economy remains quite resilient, at least for now.
Positive economic signals from the economy have led to speculation that the Fed may adopt a less aggressive approach to rate cuts than previously expected.
Michael Brown, senior research strategist at Pepperstone, said the Fed would only cut by 25 basis points but would provide dovish guidance on its new easing cycle.
Olivia Cross, North America economist at Capital Economics, said she also sees the Fed cutting by 25 basis points.
The market is still pricing in a near-certain rate cut at the upcoming Federal Open Market Committee (FOMC) meeting. This expectation was reinforced by Chairman Powell's remarks at the Fed's annual meeting in Jackson Hole, Wyoming, where he indicated that "it is time for policy to adjust."
The CME FedWatch tool currently predicts a 100% chance of a rate cut in September, with a 63% chance of a 50 basis point cut and a 37% chance of a more modest 25 basis point cut.
The upcoming decision marks a significant shift in the Fed's monetary policy, representing the first rate cut since the central bank began its tightening cycle in March 2022.
