Gold edged higher on Tuesday, even as investors pulled back slightly on U.S. rate cut bets, reflecting caution that the Federal Reserve could strike a more hawkish tone on next year’s monetary easing at its upcoming policy meeting.
FUNDAMENTALS
* Spot gold rose 0.1% to $4,194.83 per ounce as of 0146 GMT.
* U.S. gold futures for December delivery rose 0.2% to $4,223.60 per ounce.
* The benchmark U.S. 10-year Treasury yields rose to a 2-1/2-month peak on Monday, with yields accelerating to the upside after a powerful earthquake hit Japan and as investors braced for the Fed’s next policy announcement.
* Analysts expect the Fed to make a “hawkish cut”, where the language of the statement, median forecasts and Chair Jerome Powell’s press conference point to a higher bar for further rate reduction.
* Data on Friday did not change the bets for a Fed policy easing. Inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, was in line with expectations, while U.S. consumer sentiment seen improving in December.
* Last week, private payroll data showed the sharpest decline in more than 2-1/2 years in November, while, U.S. unemployment benefit claims dropped to 191,000 for the week ended November 29, a more than three-year low.
* The market is pricing in an 87% chance of a 25-basis-point rate cut, down from 90% on Monday, at the U.S. central bank’s policy meeting on December 9-10, as per CME’s FedWatch Tool.
* Lower interest rates tend to favour non-yielding assets such as gold.
* Morgan Stanley sees further upside in gold, driven by a falling U.S. dollar, strong ETF buying, continued central bank purchases and safe-haven demand.
* Elsewhere, silver fell 0.1% to $58.05 per ounce, platinum gained 0.4% to $1,649.46, while palladium rose 0.6% at $1,473.32. (Reporting by Ishaan Arora in Bengaluru; Editing by Sumana Nandy)
