The price of gold declined slightly against the background of the strengthening of the US currency and the latest US economic data, which reinforced expectations that the Fed might tread cautiously on further interest rate cuts. Meanwhile, trading is expected to be thin with U.S. markets closed on Thursday for the Thanksgiving holiday.
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 0.17% to 106.26, reducing gold's appeal for holders of other currencies.
Meanwhile, yesterday's US statistics indicated a slowdown in inflation, leading to expectations that the Fed's policy next year might be less dovish than previously expected. But the possibility of higher tariffs under the upcoming Trump administration could limit the ability of the U.S. central bank to implement rate cuts next year. According to the CME FedWatch Tool, markets see a 66.5% probability of a 0.25% rate cut in December (compared to 55.9% a week ago). Non-yielding assets like bullion thrive in a lower interest rates environment and amid geopolitical uncertainties.
Experts said that in the short term, gold may come under additional pressure, but the long-term bullish trend for gold, however, remains unchanged.