Gold (XAU/USD) remains steady near $4,120 during early Asian trading on Tuesday, maintaining gains after touching a two-week high in the previous session.
The metal’s resilience is driven by growing expectations of a US Federal Reserve (Fed) rate cut in December and a softer US Dollar (USD). Investors now turn their attention to the upcoming US ADP Employment Change data, due later in the day.
Fed rate cut expectations lift gold
Gold continues to draw support from rising market confidence in an imminent Fed rate cut. Recent data on private employment and consumer spending signaled a cooling US economy, fueling speculation that the Fed may ease policy sooner rather than later.
According to the CME FedWatch tool, markets are pricing in nearly a 67% probability of a 25-basis-point (bps) rate cut in December, climbing to about 80% by January. Lower borrowing costs typically weigh on the USD and reduce the opportunity cost of holding non-yielding assets like gold, thereby supporting its price.
Political optimism limits safe-haven demand
However, renewed optimism over resolving the US government shutdown could cap further upside for gold, traditionally viewed as a safe-haven asset. Reuters reported that the US Senate advanced a bipartisan measure on Sunday aimed at reopening the federal government and ending the shutdown, which has disrupted federal services, food aid, and air travel.
US President Donald Trump voiced support for the deal on Monday, stating that “we have support from enough Democrats, and we’re going to be opening up our country.” With the House expected to reconvene soon and commit to giving lawmakers advance notice, analysts anticipate the government will likely reopen by the end of the week, potentially easing market anxiety and reducing gold’s safe-haven appeal.
