Gold extends gains on Fed pause bets, dollar retreat

Gold rose for a fourth consecutive session on Tuesday and hit a more than six-month high, driven by a retreating dollar and expectations that the U.S. Federal Reserve has finished hiking interest rates.

Spot gold last gained 1.35% to $2,040.87 per ounce. U.S. gold futures for December delivery rose 1.47% to $2,042.00.

Gold continues to be bullish in the near term, with the dollar index in a downtrend on hopes the Fed will no longer raise interest rates and will maybe even cut rates by springtime, Jim Wyckoff, senior analyst at Kitco Metals, said.

However, “if (U.S.) GDP numbers and inflation indicators are stronger than expected, it will dent traders’ enthusiasm in bullion,” Wyckoff added.

Traders widely expect the U.S. central bank to leave rates unchanged in December, and are pricing in about a 50% chance of cuts in May next year, CME’s FedWatch Tool shows.

Lower interest rates reduce the opportunity cost of holding the non-interest-bearing bullion.

U.S. Fed Governor Christopher Waller said he is “increasingly confident” that policy is in the right spot.

Making bullion less expensive for overseas buyers, the dollar index touched its lowest since mid August.

Investors will monitor Thursday’s U.S. Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation indicator. The focus is also on the revised U.S. third-quarter GDP figures scheduled for Wednesday.

“A sense of caution ahead of another busy week for global financial markets is also lending support to the precious metal. Given how the $2,000 level proved an extremely tough resistance to conquer, gold could end up dipping without a potent fundamental catalyst,” FXTM senior research analyst Lukman Otunuga said.

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