Gold holds steady as dovish Fed signals and soft US data lift rate-cut bets

Gold (XAU/USD) holds firm on Tuesday as traders price a greater likelihood of a Federal Reserve (Fed) interest rate cut in December following dovish-leaning remarks from policymakers. At the time of writing, XAU/USD is little changed around $4,130, after climbing to an over one-week high during the Asian session.

The latest leg higher in Gold was primarily driven by mounting rate-cut expectations, and the delayed US data released on Tuesday added to those expectations. Elsewhere, markets are also keeping an eye on developments surrounding the ongoing Russia-Ukraine peace talks aimed at ending the conflict. With geopolitical risks still in play and the prospect of a December Fed rate cut on the table, the near-term outlook for Gold remains tilted to the upside.

Market movers: Fed dovish shift and soft US data lift December rate cut bets

• The headline Producer Price Index (PPI) for September rose 0.3% MoM, matching the 0.3% forecast, after a 0.1% decline in August. On an annual basis, PPI held steady at 2.7% YoY, in line with expectations. Core PPI (excluding food and energy) increased 0.2% MoM, below the 0.3% forecast, while the annual rate eased to 2.6% YoY compared with 2.9% in August.
• Retail Sales also softened, with headline sales rising 0.2% MoM, missing the 0.4% forecast and slowing from 0.6% in August. On an annual basis, Retail Sales rose 4.3% YoY in September, easing from 5% in August.
• Dovish Fed signals in recent days have prompted traders to ramp up rate-cut bets, reversing the earlier hawkish repricing that had emerged from the cautious tone of Fed officials. San Francisco Fed President Mary Daly told The Wall Street Journal on Monday that she supports lowering rates at next month’s meeting, cautioning that the labour market is increasingly vulnerable and poses a greater risk than an inflation flare-up.
• Fed Governor Christopher Waller and New York Fed President John Williams also signalled room for near-term easing. Waller told Fox Business on Monday that his primary concern is the softening labour market, saying inflation is “not a big problem” given recent weakness in employment. Last week, Williams echoed a similar stance, describing policy as “modestly restrictive” and noting there is still scope for another adjustment to guide rates closer to neutral.
• According to the CME FedWatch Tool, markets are now pricing in roughly an 80% chance of a December rate cut. However, division among Fed officials and the fact that key inflation and labour data will come only after the December 9-10 meeting keep the outlook uncertain.
• On the geopolitical front, markets are monitoring US-brokered efforts to advance Russia-Ukraine peace talks. The Financial Times reported on Tuesday that US Army Secretary Dan Driscoll is holding discussions in Abu Dhabi with Ukraine’s military intelligence chief and a Russian delegation. The original 28-point proposal had drawn criticism for favouring Russia, leading negotiators to narrow it to 19 points after what were described as constructive US-Ukrainian talks in Geneva over the weekend.

Technical analysis: Bullish trend intact above key moving averages

From a technical view, Gold is moving inside a tightening symmetrical triangle on the daily chart, with prices squeezing toward the tip of the pattern and hinting at a breakout soon. The pattern reflects consolidation after the strong rally seen this year, and with prices above key moving averages, the overall bias remains bullish.

On the upside, the $4,150 region aligns with the upper boundary of the triangle and acts as immediate resistance. A decisive break above this level would signal a bullish breakout and could accelerate buying pressure in line with the prevailing uptrend, opening the door toward $4,200 and then $4,250.

On the downside, initial support is seen around $4,100, followed by a stronger support zone near $4,050, where the lower edge of the triangle converges with the 21-day Simple Moving Average. A daily close below this area would weaken the structure and shift the near-term outlook toward a more corrective tone.