Gold prices continued trading in positive territory around the $4,20 level, driven by market expectations that the Federal Reserve (Fed) will cut interest rates at the December FOMC meeting scheduled for Wednesday.
At 10 a.m., gold prices were at $4,201, up 0.07% since opening early Monday trading in the Asian session.
Although inflation remains above the Fed’s 2% target, recent data shows the labor market is slowing down, thereby increasing the prospects of a rate cut to stimulate economic activity.
The Fed is expected to lower its key rate by 0.25 percentage points, a move that typically reduces the opportunity cost of holding gold and supports demand for the precious metal.
Besides Fed policy factors, global central bank demand also helped strengthen gold prices.
The People’s Bank of China (PBoC) reportedly increased its gold reserves for the 13th consecutive month, with a rise of 30,000 troy ounces last month. China’s total gold reserves now reach 74.12 million troy ounces, demonstrating Beijing’s ongoing commitment to diversifying its asset holdings.
At the same time, consumer sentiment in the United States also showed improvement. The University of Michigan Consumer Sentiment Index rose to 53.3 in early December, surpassing the final November reading of 51.0 and the market forecast of 52.0.
However, stronger US economic data could support the US Dollar (USD). When the dollar strengthens, gold prices usually suffer because the metal becomes more expensive for foreign buyers.
This situation can reduce demand and put pressure on gold price movements in the short term.