Profit-Taking Pressures Gold, Will It Fall Further?
The global gold price (XAU/USD) fell to around $4,210 in early Asian trading on Wednesday morning. This decline followed a strong previous rally, when many market participants opted to take profits first. Investors also chose to wait for the release of important US economic data in the next few days before opening new positions.
Today, the market is awaiting the release of the ADP Employment Change (private employment data) and the ISM Services PMI (service sector activity). Both of these data are important because they can provide a picture of the strength of the US economy. If the data is strong, the market could begin to doubt how aggressively the Fed will cut interest rates. If the data is weak, it could actually strengthen expectations of further rate cuts.
On a daily basis, gold has fallen around 0.65%, mainly due to profit-taking from short-term traders and slightly improved risk sentiment in financial markets. However, gold's downside is not expected to be too deep, as market participants remain confident that the Fed will cut interest rates again this month. Analyst Peter Grant of Zaner Metals said the market is experiencing only mild profit-taking and expectations of interest rate cuts remain fairly stable.
Data from the CME FedWatch Tool shows that market participants now estimate an 89% chance of the Fed cutting interest rates by 25 bps at its December 9-10 meeting, up from around 71% a week ago. Lower interest rates typically reduce the opportunity cost of holding gold, as yields on interest-bearing instruments become lower. This provides gold with a buffer amid price declines.
From a geopolitical perspective, the market is also monitoring the planned meeting between US envoy Steve Witkoff and Russian President Vladimir Putin to discuss a possible peace deal in the Russia-Ukraine war. If tensions escalate again, demand for safe-haven assets like gold could increase and push up prices. Conversely, if the market perceives a greater chance of peace, demand for gold as a safe haven could decrease and depress gold prices in the short term. (Asd)
Source: Newsmaker.id
