Gold prices surged to approximately $4,160 per ounce on Wednesday, reaching a near two-week high. This increase was driven by expectations of a looser US monetary policy, which led to a weaker dollar and reduced the opportunity cost of holding gold. Futures and money markets now suggest there is an over 80% probability of a 25-basis-point cut by the Federal Reserve in December. Furthermore, reports that Kevin Hassett is the leading contender for the position of Fed chair have bolstered predictions of more lenient monetary policies in the future.
The economic data presented a mixed picture. While initial jobless claims were unexpectedly low and durable goods orders were stronger, some other indicators pointed to a cooling in the economy. Despite this, traders remain focused on the broader trends of weak demand and dovish remarks from the Federal Reserve when assessing future interest rate pathways.
Concurrently, indications of diminishing geopolitical tensions, following news of a tentative peace plan for Ukraine, have lessened the immediate need for safe-haven investments such as gold, thus limiting further price increases.
