U.S. gold futures eased 0.4% after jumping 1.42% on Friday amid favorable U.S. inflation data that increased the likelihood of further Fed interest rate cuts in 2025. In a holiday-curtailed week, trading volumes are likely to thin out as the year-end approaches.
The Commerce Department said the personal consumption expenditures price index (PCE), the Fed's preferred measure of inflation, rose 0.1% in November after increasing 0.2% in October. Year-on-year, the PCE index grew by 2.4%, compared with an increase of 2.3% per annum in October. Both values were 0.1% lower than economists' forecasts.
Last week, the Fed cut interest rates by 25 basis points, but revised down its forecasts for 2025 rate cuts from four to two. Fed Chairman Jerome Powell stressed that the Fed needs to see further progress in combating inflation before continuing to ease monetary policy. On Friday, San Francisco Fed President Mary Daly and two other Fed policy makers said they felt the central bank would likely resume easing next year but signaled they would take their time given that the "recalibration phase" was over. According to the CME FedWatch Tool, markets see an 8.6% probability of a 0.25% rate cut in January (compared to 14.7% a week ago).
Today's correction in gold prices was caused by partial profit-taking, the strengthening of the US currency and rising yields on US Treasury bonds. 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 0.34% to 107.98. Meanwhile, yield on 10-year US Treasury bonds increased by 1.4 basis points to 4,538% (the highest value since May 31).