Gold Consolidates Ahead of Key Risk Events

Gold inched higher in early trading on Tuesday as the market eyes the FOMC meeting, the outcome of the UK general election and the December 15th tariff deadline. The yellow metal took a drubbing on Friday, following the release of blockbuster US jobs data. The Bureau of Labor Statistics (BLS) reported that nonfarm payrolls surged by 266,000 in November while the unemployment rate fell to 3.5% from 3.6%, the lowest level in 50 years. The rosy news boosted risk appetite in the market, dampening demand for safe-havens such as gold.

On Tuesday, the Federal Reserve’s Federal Open Market Committee (FOMC) is scheduled to begin its two-day policy meeting. At the conclusion of the meeting on Wednesday, the committee will announce its interest rate decision. Analysts widely expect the Fed to hold interest rates steady at 1.50-1.75%, after having cut rates three consecutive times this year. Investors will be watching closely for any change in rhetoric during Fed Chair Jay Powell’s press conference. A more hawkish than expected stance after the positive jobs data could pressure gold.

The UK general election, dubbed as the most important in a generation, is set to take place on Thursday. The latest polls indicated that the Conservative party is on track for winning a majority. A victory for Boris Johnson’s Conservative party is seen as the most market-friendly outcome and would likely underpin the British pound and support risk appetite.

Meanwhile, the US/China trade war saga continues with the market looking to the upcoming December 15th deadline. President Trump will decide whether or not to add additional tariffs to $160 billion worth of Chinese imports, including toys and smartphones. On Monday, US Agriculture Secretary Sonny Perdue addressed the upcoming deadline, stating: "I don't think the president wants to implement these new tariffs, but there has got to be some movement on their part to encourage him not to do that." Ongoing uncertainty over the trade war and fears over a global economic slowdown have played a key role in boosting gold prices this year.