Gold prices fell by 0.45%, partially offsetting yesterday's increase (+1.1%), while market participants continued to assess the prospects for the Fed's monetary policy after Donald Trump's election victory.
Yesterday, the Fed cut interest rates by 0.25%, and demonstrated a patient and cautious approach to further easing monetary policy. Experts believe that the Fed will cut the rate again in December, unless the inflation and labor market data surprises materially to the upside. According to the CME FedWatch Tool, markets see a 71.3% probability of a 0.25% rate cut in December (compared to 82.7% a week earlier). Bullion is considered a hedge against inflation, but higher rates raise the opportunity cost of holding the commodity.
Since the beginning of the week, the price of gold has decreased by 1.97%. This will be the first drop in the last five weeks. Meanwhile, the US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) has increased by 0.25% since the beginning of the week, and is preparing to record the 6th consecutive weekly increase. A stronger dollar makes bullion more expensive for overseas buyers.