Gold Edges Higher as Fed Speaker Supports Rate Cut
Gold (XAU/USD) edged higher to trade around $2,650 on Tuesday (3/12) after comments from a Federal Reserve (Fed) speaker raised the possibility of the Fed cutting interest rates at its December policy meeting. Lower interest rates are positive for Gold as they reduce the opportunity cost of holding non-interest-paying assets.
Rising geopolitical risks can also support Gold amid ongoing conflicts in the Middle East, now exacerbated by the outbreak of civil war in Syria, the Russia-Ukraine conflict, and political risks in France. During times of crisis, investors turn to Gold for safety.
Gold edged higher on Tuesday after comments from several Fed members appeared to favor the central bank cutting US interest rates at its December meeting.
Fed Governor Christopher Waller said on Monday that he is leaning “toward a cut in December.” His counterpart, New York Fed President John Williams, though more cautious, said that further rate cuts are warranted as risks to inflation and employment are more balanced. However, he added: “one could make an argument for skipping a December rate cut, (I) would watch the data very closely to decide.”
He went on to say, however, that “policy is tight enough that a December cut still leaves enough room to slow the pace of cuts later if needed.”
Meanwhile, Atlanta Fed President Raphael Bostic said on Monday that he was “keeping his options open” regarding a December cut. However, he also appeared to lean toward such a move, adding that because the risks to the labor market and inflation are “roughly balanced, we should also start shifting monetary policy toward a stance that is neither stimulating nor restraining economic activity.”
Their comments, along with better-than-expected US Purchasing Managers’ Index (PMI) data for November, raised market bets that the Fed will cut rates by 25 basis points. On Tuesday, the CME FedWatch tool put the probability of that scenario at 72.5% (from the mid-60s previously).
Source: FXStreet
