Gold Prices Rise After Cutting Expectations for US Interest Rate Cuts

SadaNews - Gold prices rose after four consecutive sessions of decline, as traders scaled back their bets on further monetary easing from the Federal Reserve following remarks from its chairman, Jerome Powell, who downplayed the likelihood of interest rate cuts in December.

The precious metal traded near $3960 per ounce on Thursday morning, after declining by 0.6% in the previous session.

Powell advised against trying to predict whether another rate cut might occur in 2025, after policymakers acknowledged an expected quarter-point cut on Wednesday. Bond yields and the dollar rose following his comments, putting pressure on gold, which does not yield interest and is priced in dollars.

Gold Retracts from its Record High

The yellow metal has seen a sharp decline in recent days after soaring to a record level above $4380 per ounce last week, in a rally that technical indicators suggested was excessive. Additionally, signs of progress in trade relations between the United States and China have diminished gold's appeal as a safe haven.

U.S. President Donald Trump and Chinese President Xi Jinping are set to sign a trade ceasefire agreement during their meeting in South Korea on Thursday, which will temporarily freeze the world's largest trade dispute, at least for now.

Initial signals indicate that the two leaders are preparing for an agreement that may involve rolling back some tariffs and restrictions imposed or threatened in recent months.

Gold Still Up 50% Since the Start of the Year

Despite the recent decline, gold is still up about 50% since the beginning of the year, supported by central bank purchases and investor interest in what is known as "value protection trading," where investors avoid sovereign debt and currencies to protect themselves from worsening financial deficits.

Sebastian Mullens, head of multi-asset and fixed income at Schroders, wrote in a research note: "The market experienced a natural correction, but we still believe that this bullish market cannot be compared to any previous markets, either in terms of breadth or the depth of potential cash demand."

The strong price surge has attracted institutional and individual investors to gold-backed exchange-traded funds, although this week's outflows have reduced some of that support.

The total holdings of gold exchange-traded funds decreased for the fifth consecutive day on Tuesday, the longest streak of declines since May, according to data compiled by Bloomberg.

Spot gold rose by 0.5% to $3950.42 per ounce at 7:27 AM in Singapore, while the Bloomberg dollar index fell by 0.1% after rising 0.3% in the previous session. Silver also rose for the third consecutive day, alongside increases in platinum and palladium.

Market watchers are awaiting the release of the World Gold Council's quarterly report on gold demand later on Thursday for indications of investor and central bank appetite for the precious metal.