Gold XAU/USD refreshes all-time high near $3,950 on firm Fed rate cut bets

LONDON (October 6) Gold price (XAU/USD) posts a fresh all-time high around $3,950 during the European trading session on Monday. The yellow metal strengthens as traders become increasingly confident that the Federal Reserve (Fed) will cut interest rates by 50 basis points (bps) in the remainder of the year.

According to the CME FedWatch tool, there is an 84% chance that the Fed will reduce interest rates by 25 basis points (bps) in each of its two remaining policy meetings this year.

Lower interest rates by the Fed bode well for non-yielding assets, such as Gold.

Fed dovish expectations have intensified as labor market conditions remain weak in the wake of tariffs imposed by United States (US) President Donald Trump.

Contrary to market expectations, Chicago Fed Bank President Austan Goolsbee warns of uptick in inflation in the services sector and argued against reducing interest rates aggressively.

"You see this uptick in inflation and particularly the uptick in services inflation, which is probably not coming from tariffs," Goolsbee said, added, "I’m a little wary about front-loading too many rate cuts and just counting on the inflation going away," Reuters.

Additionally, the ongoing US government shutdown has also increased the safe-haven demand of the Gold price, as it has been leading to mass lay-offs.

On Sunday, US President Donald Trump told reporters, "It’s taking place right now," after he was asked when the White House would begin lay-offs, Reuters reported.

FXStreet