Gold traded below the $4,000-per-ounce mark again on Tuesday as the dollar remained resilient at over three-month highs, while reduced chances of another U.S. interest rate cut in December and easing U.S.-China trade tensions blunted bullion’s demand.
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Gold prices fell more than 1% on Tuesday as the dollar hit three-month highs, while traders awaited U.S. economic data for clues on the Federal Reserve’s monetary policy path.
Spot gold was down 1.5% to $3,939.32. U.S. gold futures for December delivery eased 1.7% to $3,945.10.
The dollar index traded at three-month highs, making gold more expensive for other currency holders.
“With the dollar making new highs, we’re seeing that having a weight on the gold market … some of this recent strength in dollar and the weight in the gold market comes from the less likelihood of a potential (Fed) rate cut in December,” said David Meger, director of metals trading at High Ridge Futures.
Although the U.S. central bank cut interest rates last week, Fed Chair Jerome Powell suggested the reduction in borrowing costs might be the last of the year. Traders now see a 71% chance of a rate cut at the Fed’s December 9-10 meeting, compared with more than 90% a week earlier, CME Group’s FedWatch tool showed.
Non-yielding gold thrives in a low-interest-rate environment and during times of economic uncertainty.
With the U.S. government shutdown likely to become the longest ever, halting the release of government data, investors are focusing more closely on non-official economic reports, including the ADP National Employment Report. ADP’s report for October is due to be released on Wednesday.
Remarks from Fed officials have highlighted differing perspectives over how to address the current data gap.
Bullion, which has gained 53% this year, has dropped by more than 9% from its record high on October 20.
“Gold is losing some froth while still pricing in concerns over Fed independence and the possibility of stagflation as well as underlying geopolitical risk and international tensions. Some of the froth has been blown off in a much-needed correction,” Rhona O’Connell, an analyst at StoneX, said in a note.
Elsewhere, spot silver was down 1.3% at $47.45 per ounce, platinum eased 1.2% to $1,546.88 and palladium fell 3.1% to $1,400.35.
