Gold Surges to Two-Week High on Fed Rate Cut Expectations
Gold prices climbed nearly $34 on Tuesday, reaching a two-week high of $2,693.78 per ounce. The surge was driven by escalating geopolitical tensions and strong market expectations for a Federal Reserve interest rate cut next week. Spot gold ended the session up $33.75, or 1.27%, with buyers targeting the $2,700 mark for the first time since late November.
Market sentiment remains focused on the Federal Reserve’s upcoming December 17-18 meeting, with investors anticipating a 25-basis-point rate cut. The Chicago Mercantile Exchange’s “Fed Watch Tool” indicates an 86% probability of such a move. This would mark the third rate cut by the Fed this year, further enhancing gold’s appeal as a safe-haven asset in a low-interest-rate environment.
Adding to the bullish momentum, China’s central bank resumed gold purchases, and geopolitical instability in the Middle East, particularly following the ousting of Syrian President Assad, intensified market concerns. Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, noted, “Increased tensions in the Middle East have heightened concerns in the market, thus boosting safe-haven buying. Global easing trends are also back in focus, with central banks in Canada, Europe, and Switzerland expected to follow the Fed in cutting rates.”
The U.S. Consumer Price Index (CPI), set for release on Wednesday, is a key factor that could influence the Fed’s rate decision. Analysts expect a November CPI increase of 0.3% month-on-month and 2.7% year-on-year. Core CPI is forecast to remain steady at 3.3%. While CPI data aligned with expectations is unlikely to alter the anticipated rate cut, hotter-than-expected inflation could dampen prospects for further easing in early 2025.
From a technical perspective, gold prices broke above the 50-day simple moving average (SMA) of $2,685 per ounce, signaling bullish momentum. According to FXStreet analyst Christian Borjon Valencia, the first resistance level lies at $2,700 per ounce, followed by the all-time high of $2,790 per ounce. On the downside, support levels are seen at $2,650 per ounce, with further declines potentially testing the 100-day SMA in the $2,580-$2,590 range.
Gold’s role as a hedge during economic and geopolitical uncertainty continues to drive its demand. With the combination of rate cut expectations and rising geopolitical risks, the precious metal is poised to remain in focus for investors in the near term.
