Gold (XAU/USD) is holding firm near its one-and-a-half-week high in early European trading on Wednesday. The precious metal remains supported by growing expectations of another interest rate cut from the US Federal Reserve. Tuesday’s US Producer Price Index (PPI) report signaled easing inflationary pressures, prompting traders to increase bets on further policy easing. Several Fed officials also struck a dovish tone, pushing the US Dollar to a one-week low and providing fresh momentum for the non-yielding metal.
At the same time, prospects of lower US interest rates have encouraged a broader shift toward riskier assets. Optimism surrounding potential progress toward a Russia–Ukraine peace agreement has further boosted global equity markets, making investors less inclined to initiate aggressive safe-haven gold positions. However, the broader market backdrop still favors a bullish bias for XAU/USD, suggesting that any downside corrections are likely to be shallow and quickly absorbed by buyers.
Daily Market Drivers: Gold supported by dovish Fed signals and a softer US Dollar
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US inflation data:
The Bureau of Labor Statistics reported that US PPI rose 2.7% YoY in September, slightly above the previous 2.6% reading and close to expectations. Core PPI increased 2.9% YoY, compared with forecasts of 2.7% and August’s 2.8%. -
US consumer and retail data:
Retail Sales for September rose 0.2% MoM, missing expectations of 0.4% and cooling from August’s 0.6%. Meanwhile, the Conference Board’s Consumer Confidence Index dropped to a seven-month low in November, reflecting concerns about a weakening labor market. -
Dovish Fed commentary:
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New York Fed President John Williams noted last week that rates could be lowered soon without risking the Fed’s inflation goals.
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Fed Governor Christopher Waller said the labor market is soft enough to justify another 25-bps rate cut in December.
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Governor Stephen Miran added that deteriorating economic conditions call for larger rate cuts to return policy to neutral.
These remarks have pushed traders to price in nearly an 85% probability of a 25-bps cut at next month’s meeting.
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USD impact and gold reaction:
The US Dollar slid to a one-week low following Tuesday’s mixed data releases and rising expectations of Fed easing—helping gold gain positive traction during the Asian session. -
Geopolitical developments:
Ukrainian President Volodymyr Zelenskiy confirmed on Tuesday that Ukraine is prepared to move forward with a US-supported peace framework with Russia. US President Donald Trump also signaled flexibility on the timeline for negotiations, with his envoy Steve Witkoff scheduled to meet Russian President Vladimir Putin next week.
What’s next for traders?
Market participants will turn their attention to Wednesday’s US data calendar, which includes delayed Durable Goods Orders, Weekly Initial Jobless Claims, and Chicago PMI. Comments from key FOMC members will also be crucial, as they could influence US Dollar sentiment and create fresh short-term trading opportunities for XAU/USD.
