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Gold prices steadied above the $4,200 threshold on Wednesday morning, with the market pausing after recent gains as investors looked ahead to a series of US economic releases that could influence the Federal Reserve’s next policy move.
Gold futures climbed 0.4% to $4,236.90 per ounce, while spot gold retreated 0.3% to $4,206.49 an ounce at the time of writing.
“I think buyers remain keen on gold given the interest rate outlook, but they are perhaps waiting for more evidence of economic softening which may give a further signal to the Fed that a rate cut this month may be warranted,” said KCM Trade chief market analyst Tim Waterer.
According to the CME’s FedWatch tool, US rate futures are now pricing in an 88% probability of a rate cut next week, up from 85% a week earlier. Lower interest rates typically bolster demand for non-yielding assets such as gold.
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Market participants will scrutinise Wednesday’s November ADP employment report and Friday’s release of the delayed September Personal Consumption Expenditures Index, the Fed’s preferred inflation measure, for further clues on the economic trajectory.
Meanwhile, persistent geopolitical tensions, including the prolonged Russia-Ukraine war and the risk that other regional flashpoints could escalate, continue to provide support for the safe-haven metal, helping to limit the downside despite recent volatility.
Oil prices rose on Wednesday, reversing early declines, as traders judged that Russia-Ukraine peace talks were unlikely to result in the removal of sanctions on Russian crude. Gains were tempered, however, by persistent concerns about a global supply surplus.
Brent (BZ=F) crude futures rose 0.5% to $62.77 per barrel at the time of writing, while West Texas Intermediate (CL=F) (WTI) futures climbed 0.6% to $58.97 a barrel.
“Oil markets and prediction markets do not appear to price a large probability of a near-term peace agreement and removal of the sanctions on Russia oil,” Goldman Sachs analysts said in a note.
The Russian government said that a five-hour meeting between president Vladimir Putin and senior envoys of US president Donald Trump had failed to produce a compromise on a potential peace deal for Ukraine.
Tensions rose further after Putin accused European powers on Tuesday of obstructing US efforts to end the conflict by advancing proposals he said were “absolutely unacceptable” to Moscow. The remarks reinforced expectations that Russian supply will remain largely restricted to buyers such as China and India.
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Still, oversupply worries continue to dominate sentiment. Tony Sycamore, market analyst at IG, said that despite uncertainty over the talks, “concerns over an oversupply glut and soft demand continue to weigh on the crude oil price, which must remain above support in the mid $50’s to avoid a deeper setback.”
Signs of rising US inventories added to the bearish tone. According to market sources citing American Petroleum Institute data, US crude stocks increased by 2.48 million barrels in the week to 28 November. Gasoline inventories rose by 3.14 million barrels, while distillates were up 2.88 million barrels.
The US Energy Information Administration is due to release official stockpile data later today.
Sterling edged higher in early European trading on Wednesday, buoyed by growing expectations that the Fed will deliver a 25 basis point rate cut at its meeting next week, a shift that pressured the dollar.
Sterling was up 0.2% against the dollar, at $1.3248, and 0.2% higher versus the euro, trading at €1.1379.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was down 0.2% to 99.21.
Expectations of a December Fed rate cut have strengthened following dovish remarks from Fed officials and fresh signs of a cooling US economy, putting downward pressure on the dollar.
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In the UK, softer inflation data, a weakening labour market and measures introduced in the autumn budget have fuelled expectations that the Bank of England (BoE) will also move to ease policy next month. Prime minister Keir Starmer has stressed the need to bring down inflation and interest rates to support business investment and economic growth.
Markets now assign a 90% probability to a December BoE rate cut, with most analysts expecting Bank Rate to fall to 3.75%, a dynamic that could limit further gains for sterling even as the dollar softens.
In equities, the FTSE 100 (^FTSE) was flat at 9,696 points. For more details on market movements, check our live coverage here.
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