Gold Rises Supported by Rate Cut Bets.. and Stocks Advance

Gold touched its highest level in two weeks on Wednesday after U.S. economic data bolstered expectations for a Federal Reserve rate cut in December, negatively impacting the dollar.

Spot gold rose by 0.7% to $4,156.89 per ounce, the highest level since November 14, and U.S. gold futures for December delivery increased by 0.4% to $4,154.10 per ounce.

Tim Waterer, senior market analyst at KCM Trade, stated: "Expectations are now leaning towards a rate cut in December, supported by a series of hawkish statements from Federal Reserve officials and positive economic data, which enhances gold from a yield perspective."

Data released on Tuesday showed that U.S. retail sales rose less than expected in September, and over the twelve months ending in September, the Producer Price Index rose by 2.7% after rising by the same percentage in August. This data followed cautious statements recently made by Federal Reserve policymakers.

The dollar fell to its lowest level in a week as investors bet that Kevin Hassett, the leading candidate for the Federal Reserve chair, may steer policy in a more cautious direction, making dollar-denominated bullion cheaper for holders of other currencies.

U.S. benchmark 10-year Treasury yields stabilized near their lowest levels in a month recorded in the previous session. Meanwhile, U.S. Treasury Secretary Scott Piesen stated on Tuesday that the Federal Reserve's system for managing interest rates is struggling and needs simplification.

Markets are pricing in an 85% chance of a Federal Reserve rate cut in December, compared to a 50% chance last week, according to FedWatch tool data. Gold, being a non-yielding asset, tends to perform well in low-interest-rate environments.

The U.S. weekly jobless claims report is set to be released later on Wednesday. In another context, China's net imports, the largest consumer of gold, through Hong Kong fell by about 64% in October compared to September.

Precious metals analysts at Investing.com noted that gold prices rose with weak U.S. data that bolstered hopes for a rate cut in December. Gold prices rose in Asian trading on Wednesday, benefiting from a weak dollar, as a range of moderate U.S. economic data strengthened confidence that the Federal Reserve would cut rates in December.

Demand for gold as a safe haven appeared strong even as risk-based financial assets rose this week, amid ongoing tensions between Japan and China, while uncertainty regarding the ceasefire between Russia and Ukraine and inflation in fiscal spending contributed. Gold rises with weak U.S. data that bolstered rate cut expectations.

Gold prices rose on Tuesday and Wednesday after some economic data for September reinforced justifications for further monetary easing from the Federal Reserve. Retail sales saw slight growth during the month, while core producer price inflation contracted more than expected, indicating a continued slowdown in the U.S. economy.

September data will be among the last few official economic readings released by the Federal Reserve before its December meeting, as the prolonged government shutdown is expected to indefinitely delay employment and inflation data for October.

The Bureau of Economic Analysis of the Commerce Department has rescheduled the release of the Personal Consumption Expenditures Price Index data, the Federal Reserve's preferred inflation measure, to December 5.

Expectations for a rate cut in December have significantly increased over the past week, especially after two Federal Reserve officials expressed their support for more monetary easing in the near term.

The index showed that markets expect an 80.7% chance that the Federal Reserve will cut rates by 25 basis points during its meeting on December 9 and 10, a sharp increase from a 42.4% chance recorded last week.

Prices of other precious metals rose based on these expectations, with silver in spot transactions rising 0.9% to $51.85 per ounce, while platinum fell 0.1% to $1,552.50, and palladium stabilized at $1,396.80.

Among industrial metals, standard copper futures on the London Metal Exchange rose by 0.3% to $10,992.90 per ton. Codelco, a major Chilean copper producer, has purchased the red metal, indicating that it will sharply raise prices for its Chinese customers.

Lower interest rates benefit non-yielding assets, such as gold and commodities, by reducing the attractiveness of interest-sensitive assets, particularly Treasury bonds.

Gold prices and metals generally also benefited from a weak dollar, as the dollar retreated from its recent peak amid the prospect of a rate cut. A weaker dollar helps support the prices of dollar-denominated commodities, making them cheaper for non-U.S. buyers.

The dollar index, which measures the performance of the dollar against a basket of major global currencies, fell by 0.5% from its highest level in nearly six months recorded last week.

Asian Stocks Rise

In global stock markets, Asian stocks rose on Wednesday, following gains on Wall Street, as weaker-than-expected economic data bolstered expectations for a Federal Reserve rate cut at next month's monetary policy meeting.

The MSCI index, which tracks stocks in Asia and the Pacific excluding Japan, rose by 1.1%, after U.S. stocks ended the previous session with slight gains. The Nikkei index in Japan rose by 1.9%, while U.S. stock futures rose by 0.3%.

U.S. stocks recovered their losses after a sell-off earlier this month, as the S&P 500 and Nasdaq Composite indices rose for the third consecutive day on Tuesday after data showed retail sales rose less than expected and consumer confidence fell.

The data bolstered expectations that the Federal Reserve would ease its monetary policy soon and sparked speculation that some Asian central banks in emerging markets might follow suit.

Sat Duhra, a portfolio manager at Janus Henderson Investors, stated: "Once we see more cuts from the U.S., that will be positive for our region." He added: "These markets want to see that before we start taking more decisive actions to cut rates."

Federal Reserve futures contracts indicate an implied probability of 80.7% for a 25 basis point rate cut at the next meeting of the U.S. central bank on December 10, compared to equal odds a week ago.

The yield on U.S. benchmark 10-year Treasury bonds rose to 4.0113% compared to the U.S. market close at 4.002% after briefly dipping below the 4% threshold on Tuesday for the first time this month. The British pound rose in its latest trades by 0.2% to $1.3188, continuing its rise for the fifth consecutive day ahead of the British government's budget announcement, scheduled for later on Wednesday.

Finance Minister Rachel Reeves is expected to announce new tax increases in an effort to maintain financial market confidence amid any expected downgrade of British economic forecasts. In early European trading, futures for the region rose by 0.7%, German DAX futures by 0.7%, and FTSE futures by 0.3%.

The euro rose by 0.1% during the day to $1.1586. The dollar stabilized against the yen at 156.045 yen, with the Japanese currency fluctuating between gains and losses, as sources told Reuters that the Bank of Japan is preparing markets for a potential rate hike as early as next month, shifting the central bank to a hawkish stance after last week's meeting between new Prime Minister Sanai Takayuchi and Bank of Japan Governor Kazuo Ueda.

The dollar index, which measures the strength of the U.S. currency against a basket of other major trading partner currencies, fell by 0.2% to 99.686. The New Zealand dollar rose by 1.3% to $0.5691 after the Reserve Bank of New Zealand cut its benchmark interest rate by 25 basis points to 2.25% and tempered its previous hawkish guidance.

Australian stocks rose by 0.8%, and the Australian dollar rose by 0.6% after consumer prices increased at a faster-than-expected pace in October, boosting expectations that the central bank's easing cycle is coming to an end. Bitcoin also rose by 0.4% to $87,340.98.