Gold Price Slides: Fed Rate Cut Expectations and Data in Focus

Ricardo Evangelista – Senior Analyst, ActivTrades

The gold price fell on Tuesday morning and is currently trading just above the $4,200 mark. Risk appetite has increased again in financial markets, reflected in gains in equity index futures. This development negatively impacts the precious metal, which typically performs better during periods of risk aversion.

Additional pressure stems from rising hopes for a resolution to the war in Ukraine, which have reduced the inflow of capital into safe-haven gold. However, downward pressure remains limited due to increasingly cautious expectations regarding the US Federal Reserve. High-ranking FOMC officials recently made public statements that leave the door open for rate cuts in December and beyond, which, given the inverse price correlation between the two assets, contributes to the US dollar’s weakness and supports gold prices.

Against this backdrop, traders will closely monitor the release of important PCE data later this week. As the Fed’s preferred inflation indicator, this could help solidify expectations for rate cuts and shape the short- to medium-term outlook for gold prices.

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