XAU/USD Edges Toward $4,150 as Market Bets on December Fed Rate Cut Intensify

Asian Session Lifts Gold to $4,140 Amid Monetary Policy Shift

Gold trading approached the $4,140 mark during Tuesday’s early Asian session, reflecting renewed investor interest in the precious metal. The latest market sentiment has been shaped by mounting expectations surrounding the Federal Reserve’s December policy decision, with traders increasingly positioning themselves for a potential interest rate reduction.

Fed Rate Cut Probability Surges to Near 80%

According to CME FedWatch data, the probability of a quarter-point rate cut in December has climbed to approximately 79%, a significant uptick from the 30% odds recorded prior to recent comments from policymakers. This dramatic shift in market pricing underscores the growing confidence among traders that the central bank will proceed with easing measures. Fed Governor Christopher Waller reinforced this narrative on Monday, noting that current employment metrics suggest sufficient weakness to justify another 25-basis-point reduction. Similarly, San Francisco Federal Reserve President Mary Daly emphasized that rate cuts are warranted given the labor market’s increasing fragility.

“The consensus is building that the U.S. Federal Reserve is committed to cutting rates in December,” observed Bart Melek, commodity strategies head at TD Securities. This consensus has provided substantial support to non-yielding assets like gold, as lower rates would diminish the opportunity cost of holding precious metals.

Economic Calendar Holds Keys to Price Direction

The week ahead brings critical economic releases that could alter the trajectory for both gold and other commodities. The US Producer Price Index is anticipated to show a 0.3% month-over-month increase in September, while Retail Sales are projected at a 0.4% month-over-month rise. Should these figures exceed expectations, the resulting USD strength could challenge gold’s advance and potentially create headwinds for silver price prediction as investors reassess Fed rate cut odds.

Tuesday’s ADP Employment Change, Retail Sales, and Producer Price reports will serve as important barometers for monetary policy direction. Market participants are closely monitoring these releases for confirmation of the economic backdrop that would support the Fed’s easing cycle. Any surprise to the upside in economic data could trigger a rotation toward USD-denominated assets and away from gold, making the reporting day a potential inflection point for precious metals broadly.