Gold prices slipped on Thursday on profit-taking after it surged to a two-week high in the previous session, with investors considering the potential of a U.S. interest rate cut in December amid conflicting indications by the Federal Reserve.
However, the spot gold dropped 0.5 percent to $4,145.08 per ounce, as of 0405 GMT. U.S. gold futures for December delivery fell 0.6 percent to $4,140.80 per ounce.
Managing Director of GoldSilver Central, Brian Lan, said, “What they’re looking to do is take profits (after Wednesday’s climb)… The Fed isn’t clear of what they’re going to do next, so gold is just consolidating.”
Contradictory indications regarding when and how much the rate will be reduced have increased the pace of hedging towards swaptions and derivatives based on the most recent rates, and investors have sought protection against increased policy volatility.
A group of Fed officers, including the New York Fed President, John Williams, and the Governor, Christopher Waller, have opined that a December easing could be justified, given the weaknesses in the labor market that are imposing downward pressure on the Treasury yields.
Meanwhile, the Benchmark 10-year Treasury yields held near one-month lows in the last session. Their stance contrasted with many regional Fed presidents advocating a halt in easing until inflation indicated a more convincing move from about 2 percent of the target.
Gradually, Kevin Hassett, who has been a frontrunner to replace Jerome Powell as Fed Chair, like U.S. President Donald Trump, has indicated that rates must be lower.
The CME FedWatch tool states that U.S. rate futures are already priced to expect an 85% probability of a rate cut in December. The non-yielding gold is likely to benefit in the low-interest-rate environment.
Data released on Wednesday showed that weekly jobless claims dropped last week, although the labor market is not creating sufficient work opportunities among the unemployed.
Thus, the spot silver slipped 0.9 percent to $52.89 per ounce, platinum surged 1.4 percent to $1,611.04, and palladium lost 0.9 percent to $1,409.87.
