Gold prices continued to trade in positive territory around $4.20 on market expectations that the Federal Reserve (Fed) will cut interest rates at the December FOMC meeting scheduled for Wednesday.
At 10 a.m., gold prices were at $4,201, up 0.07% since they opened early Monday in Asian trading.
While inflation remains above the Fed’s 2% target, recent data shows the labor market is slowing, raising the prospect of a rate cut to stimulate economic activity.
The Fed is expected to cut its key rate by 0.25 percentage points, a move that typically reduces the opportunity cost of holding gold and supports demand for the precious metal.
In addition to the Fed’s policy factors, global central bank demand is also helping to strengthen gold prices.
The People's Bank of China (PBoC) has reportedly added to its gold reserves for the 13th consecutive month, with an increase of 30,000 troy ounces last month. China's total gold reserves now stand at 74.12 million troy ounces, indicating Beijing's continued commitment to diversifying its asset holdings.
Meanwhile, consumer sentiment in the United States is also showing signs of recovery. The University of Michigan's Consumer Sentiment Index rose to 53.3 in early December, beating the end-of-November reading of 51.0 and the market forecast of 52.0.
However, stronger US economic data could provide support to the US Dollar (USD). When the dollar strengthens, gold prices are usually affected as the metal becomes more expensive for overseas buyers.
This could reduce demand and put pressure on gold prices in the short term.
