Gold Rises as Weak US Economic Data Boosts December Rate Cut Expectations

TLDR

• Gold prices rose 0.9% to $4,166.13 per ounce as weak US economic data increased expectations for a Federal Reserve rate cut in December
• Retail sales barely grew in September and core producer inflation fell more than expected, signaling economic cooling
• Markets now price in an 80.7% chance of a 25 basis point rate cut at the Fed’s December 9-10 meeting, up from 42.4% last week
• The US dollar fell 0.5% from recent highs, making gold cheaper for international buyers and supporting prices
• Central banks in emerging markets continue steady gold purchases as part of long-term reserve diversification strategies

Gold prices climbed on Wednesday morning in Asian trading as weak US economic data strengthened the case for a Federal Reserve interest rate cut in December. The precious metal rose 0.9% to reach $4,166.13 per ounce.

Gold futures for February delivery increased 0.9% to $4,201.15 per ounce. The gains came after economic reports showed continued cooling in the US economy.

Retail sales data for September showed minimal growth during the month. Core producer inflation decreased more than analysts had predicted.

These September readings will be among the final official economic reports available before the Fed’s December meeting. A prolonged government shutdown has delayed the release of October labor and inflation data.

The Commerce Department’s Bureau of Economic Analysis rescheduled the PCE price index data for December 5. The PCE index serves as the Federal Reserve’s preferred measure of inflation.

Market expectations for a December rate cut have increased substantially in recent days. Two Federal Reserve officials recently spoke in support of additional near-term monetary easing.

According to CME Fedwatch data, markets now assign an 80.7% probability to a 25 basis point rate cut at the Fed’s December 9-10 meeting. This represents a sharp increase from the 42.4% chance priced in just one week earlier.

The US dollar index fell 0.5% from the near six-month high reached last week. The dollar index tracks the greenback’s value against major global currencies.

Lower Rates Support Gold Prices

Lower interest rates typically benefit gold because they reduce the appeal of rate-sensitive investments like Treasury bonds. Gold does not pay interest or dividends, making it more attractive when yields on other assets decline.

A weaker dollar also supports gold prices in multiple ways. Commodities priced in dollars become less expensive for buyers using other currencies.

Other precious metals posted gains alongside gold. Spot silver rose 1% to $52.0215 per ounce, trading close to record highs. Spot platinum increased 0.2% to $1,559.90 per ounce.

Demand for safe-haven assets remained elevated despite gains in risk-driven markets this week. Ongoing tensions between Japan and China contributed to continued interest in gold.

Central Bank Buying Continues

Central banks in emerging markets have maintained consistent gold purchasing programs. These institutions are buying gold as part of structural diversification strategies for their foreign reserves.

The purchases reflect long-term reserve management goals rather than short-term tactical decisions. This steady baseline demand provides support for gold prices.

Industrial metals also posted gains on Tuesday and Wednesday. Benchmark copper futures on the London Metal Exchange rose 0.3% to $10,992.90 per tonne.

Copper prices received support from Chilean producer Codelco, which indicated it will increase prices for Chinese customers. Chile is a major global copper producer.

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