Gold Trades Near 6-Month High Amid Hopes of Rate Hike Pause

Gold prices traded near six-month highs on Tuesday and appeared on track to extend a three-week uptrend amid the possibility of the Federal Reserve taking a breather from hiking interest rates.

Spot gold gained 0.05% to $2,015.33 per ounce after crossing the $2,018.00 level on Monday to mark its highest since May 16. December contract US gold futures also added 0.16% to $2,015.65 per ounce.

Gold’s Bullish Outlook Stays Amid Dovish Fed Expectations

The yellow metal is expected to remain at the $2,000 psychological level on growing expectations that the US central bank would ease monetary policy sooner than expected.

The prospect of a rate cut from the Fed in 2024 has emerged following indications of easing inflationary pressures, which capped the US dollar and bond yields and reinforced a positive outlook for the safe-haven metal.

The greenback posted a three-month low against its peers, presenting other currency traders the opportunity to acquire gold at a discount, while the 10-year Treasury yield last stood at 4.40%.

Recent data has pointed to slowing inflation in the world’s largest economy, with the consumer price index (CPI) unchanged in October, although it rose 3.2% from a year earlier after climbing to 3.7% in September.

The core CPI, which excludes volatile food and energy costs, was up 0.2% in the month and rose 4.0% year-on-year.

However, senior analyst Matt Simpson does not expect US inflation to continue easing at a speed fast enough to support the prospect of rate cuts, which may hinder gold’s surge.

Markets’ attention will now be on the central bank’s preferred inflation measure, the personal consumption expenditure (PCE) data, due on Thursday.

Traders widely see the Fed keeping key interest rates unchanged in December while estimating a 50-50 chance of loosening policy in May 2024.

Market players will also focus on the revised figures for the country’s third-quarter gross domestic product (GDP), set to be released on Wednesday.