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Market Analysis
Gold prices firmed slightly on Tuesday, showing signs of stability after a decidedly bearish start to the week.
KAU/USD 1-hourly
Prices moved in a range of $1,983 to $1,997 an ounce through the day, after falling as low as $1,976 an ounce on Monday.
Looking ahead this week, the US Fed is widely expected to maintain interest rates at the current 22-year high of 5.5% in a decision scheduled for Wednesday, with the markets looking for further clues on the outlook ahead of the Fed’s next meetings in December, January and March.
Data from interest rate traders currently indicates a 54% probability that the central bank will hold rates unchanged at its March meeting, and a 44% chance of a 25-basis point cut. It should be cautioned that these implied probabilities fluctuate on a day-to-day basis as the trading environment evolves. Interest rates matter for gold prices because they affect the opportunity cost of holding non-interest-bearing assets.
Interest rate decisions are also due on Thursday by the ECB and Bank of England – both expected to hold rates unchanged at 4.5% and 5.25% respectively as central banks seek to keep inflation under control.
Gold also continues to take support from ongoing geopolitical tensions in the Middle East. A cruise missile launched from Houthi-controlled Yemen hit a Norwegian-flagged oil and chemical tanker in the Red Sea off the coast of Yemen on Tuesday, according to news reports. This latest incident serves to highlight the risk that the conflict between Israel and Palestine could spill over into other regions. Heightened geopolitical risks tend to drive investment into safe havens such as precious metals.
Looking further out, Friday will see the release of Chinese industrial production figures and German manufacturing PMI flash data, which are likely to provide the latest indicators of economic health in those major economies.
Contributing to kitco.com
