Gold (XAUUSD) fell nearly 3% on Friday and is back below $4,100 after several Fed officials expressed uncertainty about a rate cut at the upcoming December 9-10 Federal Open Market Committee (FOMC) meeting.
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The price of gold tends to hold an inverse relationship with interest rates. That’s because the opportunity cost of holding gold rises when rates are high and falls when rates are low, making it more attractive relative to interest-bearing assets.
Fed Officials Undecided on December Rate Cut as Odds Drop
Kansas City Fed President Jeffrey Schmid, who was the only October FOMC member to dissent in favor of keeping rates unchanged, reiterated his view on Friday that inflation is “too hot.” He added that structural changes are behind the weakness in the labor market, and that a rate cut wouldn’t help boost jobs.
The odds of a rate cut next month are now seen as a coin flip on CME’s FedWatch tool, tallying at 49.6% compared to 66.9% a week ago and 94.4% a month ago.
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