Stability of Gold Prices Near $3960 an Ounce

SadaNews - Gold stabilized after recording its largest decline in over a week, as the U.S. dollar rose to its highest levels since May, which limited demand for the precious metal.

Spot gold traded near $3960 an ounce after dropping by about 2% in the previous session.

The U.S. dollar index rose for the fifth consecutive day on Tuesday, marking the longest winning streak since July, as traders reassessed the prospects of another rate cut by the Federal Reserve next month.

The rise in the dollar makes dollar-denominated commodities, such as gold, more expensive for most buyers.

Warnings from the Fed and a decline in fund flows

Earlier this week, three Federal Reserve policymakers refrained from supporting an additional rate cut in December, balancing the risks of inflation and a weak labor market.

Investors will receive more signals this week, with anticipated statements from both Alberto Musalem, President of the Federal Reserve Bank of St. Louis, and Beth Hammack, President of the Federal Reserve Bank of Cleveland.

Despite the recent decline, gold is still up about 50% since the beginning of the year, after reaching a record level last month before giving back some of its gains.

This decline was accompanied by outflows from gold-backed exchange-traded funds, although the pace of outflows has slowed in recent days.

Expectations for trading in a narrow range

Bart Melek, a strategist at TD Securities, wrote in a note: "It shouldn't be a big surprise if the yellow metal stabilizes in a lower trading range between $3800 and $4050 per ounce," pointing to factors including uncertainty about U.S. rate cuts as well as concerns about weak consumer demand in China.

He added that the factors supporting gold's rise this year remain largely in place, noting that high central bank purchases and strong demand from individual investors are likely to drive prices up again after the current stabilization phase.

As of 8:28 AM Singapore time, gold was little changed at $3936.66 per ounce, while the Bloomberg Dollar Index remained relatively unchanged. Silver remained steady, while platinum and palladium saw declines.