Gold prices fell by 0.2% on the back of partial profit-taking and the renewed growth of the US dollar. However, the recent escalation of the Russian-Ukrainian conflict has limited the price drop.
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) rose by 0.38% to 106.61. A stronger U.S. currency makes bullion more expensive for overseas buyers.
Market participants are also preparing for speeches by Fed policymakers, hoping to get new clues about the trajectory of monetary policy. Recent U.S. economic data and expectations that Republicans will adopt more inflationary policies have increased the likelihood that interest rates will remain high for a longer time. Last week, US Federal Reserve Chairman Jerome Powell signaled a patient stance on lowering interest rates, given the strength of the US economy. Currently, market participants estimate a rate cut of only 77 basis points by late 2025, compared with more than 100 a few weeks ago. According to the CME FedWatch Tool, markets see a 58.9% probability of a 0.25% rate cut in December (compared to 58.7% yesterday).
According to experts, a pause in the Fed's monetary policy easing cycle at the December meeting could subdue the gold price, but the macroeconomical and geopolitic uncertainty, and healthy physical demand will maintain positive gold-market sentiment.