Gold continues rally amid Fed rate cut expectations

Gold steadied after hitting the highest since May, as comments from Federal Reserve officials bolstered bets that policymakers will start cutting interest rates next year.

The dollar and Treasury yields remained under pressure after Governor Christopher Waller, one of the most hawkish Fed officials, on Tuesday said policy is well positioned to return inflation to a 2% target, suggesting interest rates may not need to rise again. Lower borrowing costs are typically positive for non-yielding bullion. 

Gold has rallied about 13% since early October, initially fueled by haven buying in the wake of the Israel-Hamas conflict. It’s now within sight of the record high set during the pandemic, supported by a drop in the yields paid by global bonds that are on track for their best month since 2008.

This week, investors will be closely watching US economic data, including the Fed’s preferred measure of underlying inflation, for further clues on the direction of interest rates. Data on gross domestic product for the third quarter will be released later Wednesday.

Meanwhile, traders are increasingly positioning for a hard economic landing and aggressive Fed policy easing next year, with speculators in the US Treasury market now the most bullish on record, according to a weekly survey conducted by JPMorgan Chase & Co. since 1991. 

Spot gold added 0.1% to $2,043.40 an ounce by 8:39 a.m. in London, after jumping the most in more than five weeks on Tuesday. It’s now roughly $32 below its all-time high. The Bloomberg Dollar Spot Index dipped 0.1%, after weakening in recent sessions. Silver, platinum and palladium all declined.