Gold Reaches Three-Week High Amid Expectations of U.S. Interest Rate Cuts

Gold prices reached their highest level in approximately three weeks during trading on Tuesday, bolstered by rising expectations for a potential interest rate reduction by the U.S. Federal Reserve next month. This has led investors to seek the precious metal as a safe haven.

In market activity, spot gold increased by 0.4% to $4,135.55 per ounce, while U.S. gold futures for December delivery rose by 0.6% to $4,147.60 per ounce.

This surge comes amid recent U.S. economic data indicating a slowdown in the labor market and declining consumer confidence. Job losses were reported in the U.S. economy last October, alongside a decrease in employment in the public and retail sectors. Consumer confidence has also fallen to its lowest level in three and a half years in November, driven by concerns over the longest government shutdown in U.S. history.

In this context, the CME Group's "FedWatch" tool indicates that traders now see a 64% chance that the U.S. central bank will cut interest rates by 25 basis points next month.

Stephen Miran, a member of the Federal Reserve, confirmed on Monday that a 50 basis point cut would be appropriate in December, citing declining inflation and rising unemployment rates.

Gold, which does not yield any return, tends to benefit from a low interest rate environment and is sought after during periods of economic uncertainty.

It is noteworthy that the U.S. Senate approved an agreement on Monday to end the longest government shutdown in U.S. history, resolving a crisis that disrupted food assistance for millions and deprived hundreds of thousands of federal workers of their salaries.