Gold prices rise on expectations of Fed rate cut, inflation data on tap

Gold prices gained on Tuesday, helped by escalating geopolitical tensions in the Middle East and expectations of a US rate cut this month, with key US inflation data later this week grabbing investors' attention. 

Spot gold climbed 0.6 per cent to $2,674.39 per ounce, as of 1101 GMT. US gold futures rose 0.4 per cent to $2,697.00. 

Friday's jobs report has boosted bets around a December Fed rate, geopolitical tensions in the Middle East and reports of China's central bank resuming gold purchases after a six-month break are supporting gold prices, said FXTM senior research analyst Lukman Otunuga. 

Traders now see about a 86 per cent probability of a 25-basis-point rate cut next week, according to the CME FedWatch tool, up significantly from 73 per cent last week.

 

Investors are eyeing the US Consumer Price Index (CPI) release on Wednesday and the Producer Price Index (PPI) on Thursday, both expected to have an influence on the Federal Reserve's rate-cut decision. 

"Gold bulls could face obstacles if a hotter-than-expected US CPI report reduces bets around Fed cuts beyond December 2024," Otunuga added. 

The non-yielding bullion tends to shine in a lower-interest-rate environment and during periods of economic or geopolitical instability. 

Israeli forces advanced 25 km southwest of Damascus after seizing a buffer zone in southern Syria and conducting overnight airstrikes on Syrian military targets, Syrian sources reported Tuesday. 

Elsewhere, China will adopt an "appropriately loose" monetary policy and a more proactive fiscal approach next year, as per the Politburo. 

This is "a shift from a 'prudent' stance that has been held for nearly 14 years. Hence, a further reduction of interest rates in China may spur higher demand for gold purchases," said Kelvin Wong, OANDA's senior market analyst for Asia Pacific. 

Spot silver added 0.1 per cent to $31.85 per ounce, platinum fell 0.1 per cent to $938.11 and palladium was down 0.2 per cent at $972.67.       

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)