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Gold prices eased on Tuesday as traders, having largely priced in an imminent Federal Reserve rate cut, turned their attention to the tone of the US central bank’s two-day policy meeting beginning later in the day, searching for signals that the coming easing cycle may be gentler than markets had anticipated.
Gold futures slipped 0.1% to $4,214.70 an ounce while spot gold lost 0.5% to $4,186.93 at the time of writing.
Positioning ahead of the meeting has dominated flows, said OANDA senior market analyst Kelvin Wong. “Earlier in the month, Jerome Powell signalled hawkish rate cut guidance during his press conference. So investors in the US Treasury market are adjusting their positions.”
Analysts expect the Fed to deliver what some have termed a “hawkish cut”, pairing a reduction in borrowing costs with forecasts that underline a high bar for additional easing into next year.
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Market pricing now assigns an 89% probability of a quarter point drop to the 3.5% to 3.75% level at this week’s meeting that starts on Tuesday and ends with the announcement on Wednesday 10 December, according to CME’s FedWatch Tool. Lower interest rates typically support non yielding assets such as gold.
Oil prices slipped on Tuesday, extending the previous session’s 2% decline, as traders monitored peace talks aimed at ending Russia’s war in Ukraine, weighed concerns over ample supply and looked ahead to a decision on US interest rates.
Brent crude (BZ=F) futures lost 0.2% to $62.37 per barrel, while the West Texas Intermediate (CL=F) retreated by 0.1% to $58.80.
Both benchmarks dropped by more than one dollar on Monday after Iraq restored output at Lukoil’s West Qurna 2 oilfield, one of the largest in the world.
Ukraine is preparing to present a revised peace proposal to the US following discussions in London between president Volodymyr Zelenskiy and the leaders of France, Germany and Britain.
“Oil is keeping to a tight trading range until we get a better idea of which way the peace talks will go,” KCM Trade chief market analyst Tim Waterer said.
“If the talks break down, we expect oil to move higher, or if progress is made, and there is a likelihood of Russian supply to the global energy market resuming, prices would be expected to drop,” he added.
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Oil markets are set to face a growing surplus in 2026, putting sustained pressure on prices, ING analysts said in a research note. Analysts expect a surplus of more than 2 million barrels per day next year as OPEC+ unwinds supply cuts faster than anticipated and non OPEC production continues to expand. Global supply is forecast to rise by 2.1 million barrels per day, while demand is seen increasing by only 800,000 barrels per day.
ING expects Brent crude to average $57 a barrel in 2026, warning that rising inventories and a “deeper contango structure” could weigh further on the market.
A contango structure refers to a situation in the oil futures market where futures prices are higher than the current spot price. In other words, contracts for delivery in the future become progressively more expensive the further out they go.
Sterling strengthened in early European trading as investors bet that the dollar will remain under pressure if the Federal Reserve signals additional rate cuts beyond the widely expected move in December.
Sterling was up 0.2% against the dollar, at $1.3341, and 0.1% higher versus the euro, trading at €1.1452.
The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was flat at 99.09.
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UK economic growth data for October is due on Friday. A Reuters poll of economists points to a 1.4% annual increase and a 0.1% rise on the month, after September figures were distorted by a cyberattack at Jaguar Land Rover that halted output and weighed on national activity.
“Overall, some good news for the UK economy could be on the cards this week, although we continue to think that the underlying trend is for the economy to stall in the coming months,” XTB research director Kathleen Brooks said.
In equities, the FTSE 100 (^FTSE) underperformed on Tuesday morning, down 0.1% to 9,637 points. For more details on market movements, check our live coverage here.
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