Gold price (XAU/USD) is trading positively around $4,075 during Monday’s early Asian session. The precious metal is gaining ground due to increased expectations of a Federal Reserve (Fed) rate cut, following recent comments from New York Fed President John Williams. Market participants are now awaiting the release of the US September Producer Price Index (PPI) and Retail Sales reports on Tuesday.
Last Friday, New York Fed President John Williams suggested that the US central bank could still reduce interest rates in the near term without compromising its inflation target. This has significantly boosted market sentiment, with the CME FedWatch Tool now indicating a nearly 74% probability of a Fed rate cut at its December meeting, a sharp increase from 40% last week. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets like gold, thus providing support.
However, not all Fed officials share this dovish outlook. Dallas Fed President Lorie Logan and Boston Fed President Susan Collins maintained a hawkish stance, advocating for keeping the policy rate on hold “for a time.”
Traders will gather further clues from upcoming economic data and the conflicting signals from Fed officials. The delayed US PPI inflation and Retail Sales data, due on Tuesday, will be particularly scrutinized. Consensus forecasts project a 0.3% month-over-month (MoM) increase in headline PPI for September, with Retail Sales expected to show a 0.4% MoM rise for the same period. Any indications of hotter-than-expected inflation could temper hopes for aggressive Fed rate cuts. Such an outcome would likely strengthen the US Dollar (USD), potentially putting downward pressure on the USD-denominated gold price.
