By Bas Kooijman, CEO and Asset Manager of DHF Capital S.A
Gold recorded some volatility on Friday, but held close to the levels seen this week amid lower liquidity as US markets went through a holiday and a shorter trading day today and as the CME outage affected market operations. However, the metal is set to end the week in positive territory, effectively reversing the prior week’s pullback, and is also on track to secure a fourth consecutive monthly advance.
At the same time, the underlying tone remains constructive. Growing expectations of a December Federal Reserve rate cut continue to anchor the bullish narrative, with investors pricing in more than an 85% probability of a 25-basis-point move. The shift follows a wave of comments from Fed officials highlighting labour-market fragility. The prospect of potential leadership changes at the Fed has added to the dovish bias.
Some uncertainty remains, however, on the geopolitical side. In Eastern Europe, the outcome of the efforts toward a ceasefire remains unclear and could create some volatility in the market. A failure to reach a breakthrough could fuel more demand for safe-haven assets.
Traders could turn to next week’s data release for hints on the direction of monetary policy. Shifting sentiment could affect the market’s direction if new data leads to a decline in rate cut expectations. PCE, jobless claims and PMI data releases could remain in focus in addition to speeches from Fed members.