Gold defends $4,300 amid weak dollar outlook... Fed comments are a variable

Gold Price Rises to Around $4,315 in Asia Time

In early Asian hours on Monday, spot gold(XAU/USD) is trading near $4,315, maintaining a stable support level at $4,300. Market analysts predominantly believe that gold is currently supported at high levels as the possibility of the US Federal Reserve(Fed) lowering interest rates next year re-emerges.

Fed’s Additional Easing Signals Drive Gold Buying

Last week, the Fed decided on its third interest rate cut(25bp) this year, lowering the benchmark rate to a range of 3.50% to 3.75%. When interest rates decline, the opportunity cost of holding gold, which yields no interest, decreases. Therefore, in an environment of further easing, gold is viewed as a relatively attractive alternative from an asset allocation perspective.

Uncertainty is also fueling demand for gold. Recent incidents at Bondi Beach in Sydney, Australia, have heightened global risk sentiment, leading to increased inflows into safe-haven assets like gold.

Mixed Signals from Fed Officials as Short-term Variables

Divergent views within the Fed also attract market attention. The Chicago Fed President recently mentioned that, considering delayed economic indicators, more data might have been needed before further rate cuts. This suggests that the Fed’s future policy path remains unclear.

Conversely, the Cleveland Fed President maintained that the current rate should be kept to contain inflation. Such differences in tone could influence the Fed’s policy direction moving forward.

Dollar Fluctuations Are Key to Gold Prices

This week’s scheduled release of the US October non-farm payrolls (NFP) data is expected to be a crucial indicator for short-term market direction. Additionally, statements from Federal Reserve officials Steven Miran and John Williams are also key points for investors to monitor.

If comments from senior Fed officials turn out to be more hawkish than expected, the USD(USD) is likely to rebound. In such a scenario, gold, as a dollar-denominated asset, could face short-term downward pressure.