Gold retreats from six-week highs with Fed cut bets limiting downside

LONDON (December 2) Gold (XAU/USD) edges lower on Tuesday as traders lock in some profits following Monday’s surge to six-week highs. At the time of writing, XAU/USD is trading near $4,197, down nearly 0.95% on the day.

A modest uptick in the US Dollar (USD) and firmer Treasury yields are also weighing on the precious metal. At the same time, a cautious risk backdrop, with major global stock indices stabilizing after Monday’s sell-off, is tempering safe-haven demand and contributing to the pullback.

Despite the mild retreat, downside remains limited as Gold stays broadly supported by expectations that the Federal Reserve will lower interest rates at its upcoming monetary policy meeting next week.

With no major US economic releases due on Tuesday, Gold’s intraday moves may remain subdued, leaving price action largely driven by USD dynamics and shifts in the broader risk environment.

Market movers: Softer US data and rising Fed cut bets shape Gold’s outlook

• The US Dollar Index (DXY), which measures the Greenback's value against a basket of six major currencies, is staging a modest rebound after slipping to its lowest level in over two weeks on Monday. At the time of writing, the index is trading around 99.47, snapping a five-day losing streak.
• US economic data released on Monday painted a softer picture for the manufacturing sector. The ISM Manufacturing Purchasing Managers Index (PMI) slipped to 48.2 in November from 48.7, missing the 48.6 forecast and marking a ninth straight month in contraction. The details were also somewhat lacking. New Orders eased to 47.4 from 49.4, extending their recent losing streak, while the Employment Index fell to 44 from 46. The only firm spot came from Prices Paid, which stayed in expansion and inched up to 58.5 from 58.
• Delayed US data released last week pointed to softer economic momentum. Retail Sales rose just 0.2% MoMwhile inflation was mixed with headline Producer Price Index (PPI) rising 0.3% MoM in September and Core PPI rising only 0.1%. Consumer Confidence slipped to its lowest since April, and ADP figures showed private payrolls falling by an average of 13,500 jobs per week compared with 2,500 previously.
• Recent soft economic data, paired with dovish-leaning remarks from several Federal Reserve officials, pushed traders to ramp up rate-cut expectations. According to the CME FedWatch Tool, markets now assign around an 87% probability of a 25 basis point (bps) cut at next week’s meeting. Traders now turn their attention to this week’s key releases, including ISM Services PMI and ADP Employment Change on Wednesday, followed by Personal Consumption Expenditures (PCE) inflation on Friday.
• According to a new Goldman Sachs poll, almost 70% of global institutional investors expect prices to extend gains next year, with 36% anticipating a move above $5,000 by the end of 2026 and another third seeing a $4,500-$5,000 range. Other banks share a similar view. Bank of America projects Gold could reach $5,000, Deutsche Bank sees prices near $4,950 in 2026, while HSBC is more cautious, projecting Gold in the $3,600-$4,400 range.

FXStreet