Gold Dips as Fed Uncertainty and Stronger Dollar Weigh on Bullion

Gold Prices Under Pressure Amid Fed Rate-Cut Uncertainty

Gold prices remain under pressure amid uncertainty over the Federal Reserve's rate-cut plans, with traders now pricing in just a 46% chance of a 25-basis-point cut in December. The market is caught in a data void after a six-week U.S. government shutdown delayed key economic reports, including the all-important September nonfarm payrolls data set to be released on November 20. Investors are watching for clues on whether the Fed will maintain its recent hawkish tone or pivot toward easing, which could influence gold's appeal as a non-yielding safe-haven asset.

The U.S. dollar index has edged higher, reaching 99.50, as expectations for rate cuts wane. A stronger dollar makes gold more expensive for holders of other currencies, adding to downward pressure on bullion.

Analysts say the market is in a state of "back and forth" ahead of the deluge of economic data expected in the coming weeks according to market analysis.

Gold is currently trading at around $4,187 an ounce, down slightly from its earlier intraday high. While it has gained nearly 5% this week, reflecting a broader trend of increased demand for precious metals, technical indicators suggest a potential reversal is looming. Investors remain divided, with some expecting a surge in data to justify a Fed rate cut and others betting on further signs of economic resilience.

Why the Standoff Happened

The Fed's recent policy outlook has muddied expectations for gold investors. Although the central bank cut rates by 25 basis points in its last meeting, several policymakers, including Lisa Cook, Mary Daly, and Austan Goolsbee, have signaled caution about additional cuts. These comments have reduced optimism for near-term rate reductions, which in turn dampens gold's appeal.

Adding to the uncertainty, the U.S. government's extended shutdown delayed a critical wave of economic data, leaving investors in the dark about inflation, employment, and overall economic momentum. Traders are now eager for the delayed reports to provide clarity, particularly the September jobs data and minutes from the Fed's last meeting according to analysts.

How Markets Reacted

Gold prices slipped on Monday as traders weighed the possibility of a weaker December rate cut against a stronger dollar according to market reports. Spot gold traded at $4,070.80 per ounce, while December gold futures eased to $4,071.40 according to market data. The lack of a clear direction has led to choppy, range-bound action in the market, with investors hesitant to take large positions ahead of the data flood.

Meanwhile, the broader market environment remains supportive of gold in the long term. The metal has surged nearly 60% this year, driven by central bank purchases and a flight to safe-haven assets amid global fiscal uncertainty. However, shorter-term technical indicators suggest caution according to technical analysis, with a bearish divergence in the RSI and a "Shooting Star" candlestick pattern signaling potential weakness.

What Analysts Are Watching

Market participants are closely watching the September nonfarm payrolls report and the Fed's minutes for clues on the central bank's next move. The data could either reinforce a dovish pivot or confirm continued restraint, with major implications for gold's performance according to market analysis. Analysts at High Ridge Futures note that the market is in a state of "choppy action" as it awaits this information according to market commentary.

The dollar index is also a key focus. A sustained rise in the greenback could further weigh on gold prices, while any signs of a pullback could boost demand for the metal according to market analysis. Additionally, technical analysts are monitoring the $4,036 level as a potential downside trigger for a reversal according to technical indicators. A break above $4,155 could, however, signal a rebound in investor sentiment.

Risks to the Outlook

Despite its strong year-to-date performance, gold faces near-term risks from a more hawkish-than-expected Fed. Traders now see a 46% chance of a 25-basis-point cut in December, down from over 60% last week according to market analysis. If the central bank signals no intention of further easing, gold could struggle to maintain its upward trajectory.

On the other hand, a weak jobs report or signs of slowing economic momentum could reignite rate-cut expectations and push gold higher. Analysts at Scotiabank remain bullish for the long term, forecasting prices to rise to $3,800 per ounce by 2026. However, short-term volatility is likely as the market digests new data and Fed signals.