Gold prices dropped to around $4,210 early Wednesday in Asia as traders took profits ahead of important US economic reports. This decline of about 0.65% was driven by short-term futures trading and a more positive market sentiment. Possible losses may be limited, as many expect a rate cut from the Federal Reserve this month. Fed funds futures now show nearly an 89% chance of a rate cut during the meeting on December 9-10, up from 71% last week.

US And Russia Discuss Peace Plan

In other news, talks between the US and Russia regarding a peace plan for Ukraine could influence gold prices. Rising tensions may boost demand for gold as a safe haven, while optimism about peace could lead to lower prices. Gold has long been prized as a store of value and a medium of exchange, making it a popular choice for investment during uncertain times. Central banks, especially in emerging economies, have been major buyers, adding 1,136 tonnes to reserves last year. Gold often moves inversely to the US Dollar and riskier assets. Factors like geopolitical events, interest rates, and US Dollar performance impact its price, as gold is traded in USD. Currently, gold is retreating to around $4,210 as traders take profits before significant US economic data is released today. The market is particularly focused on the ADP Employment and ISM Services PMI figures to assess economic health.

Expectations For Federal Reserve Rate Cut

A key driver of gold’s strength is the strong belief in another Federal Reserve rate cut next week. The market anticipates an 89% chance of a cut during the December 9-10 meeting, spurred by recent data showing that November CPI inflation dropped to 2.8% and Q3 GDP growth was revised downward to just 1.5%. These indicators suggest the Fed has room to lower rates, which is bullish for non-yielding gold. Today’s data releases will play a critical role in shaping the short-term outlook. Current predictions point to a weak ADP jobs report of about 130,000, which would reinforce expectations for a rate cut if confirmed. However, a stronger report could temporarily push gold prices down by raising doubts about the Fed’s urgency to act. Despite daily fluctuations, strong physical demand from central banks remains a powerful supporting trend. The World Gold Council’s report for Q3 2025 noted that global central banks, particularly from emerging markets, bought an additional 250 tonnes of gold. This ongoing buying creates a solid support for gold prices, suggesting that price dips may be seen as buying opportunities. Reflecting on the aggressive rate hikes of 2022-2023, the current shift toward easing is a significant change that benefits gold. For traders dealing in derivatives, buying call options for January or February 2026 can help capture potential gains from the expected rate cut while managing risk. Bull call spreads also offer a way to position for a price increase with defined risk. Monitoring the geopolitical situation between the US and Russia in relation to the Ukraine war is essential. Positive developments from peace talks could pressure gold prices by lessening its appeal as a safe haven. Conversely, any setbacks in these discussions might lead to a surge in capital flowing back into gold, increasing prices. Create your live VT Markets account and start trading now.

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