Gold Retreats from Two-Week High as Investors Take Profits

Gold fell on Thursday amid profit-taking after reaching its highest level in nearly two weeks in the previous session, while investors assessed the likelihood of a U.S. interest rate cut in December amid mixed signals from the Federal Reserve.

Spot gold dropped 0.3% to $4,153.49 per ounce as of 06:16 GMT. U.S. gold futures for December delivery also fell 0.5% to $4,150.0 per ounce.

Brian Lan, managing director of GoldSilver Central, said, "They are looking to take profits after Wednesday's rise, and the Federal Reserve is not entirely clear about its next move, so gold is experiencing stability."

Mixed signals regarding the timing and magnitude of interest rate cuts have accelerated hedging flows towards overnight interest rate-linked derivatives, as investors seek protection from increasing uncertainty regarding policies.

Some Federal Reserve officials, led by New York Fed President John Williams and Governor Christopher Waller, have stated that monetary easing in December may be warranted due to a weak labor market putting pressure on U.S. Treasury yields. U.S. benchmark 10-year Treasury yields stabilized near their lowest levels in a month during the previous session.

However, their stance contrasts with that of many regional Fed presidents who have called for a temporary halt to monetary easing until inflation shows a more convincing trend towards the 2% target.

Meanwhile, Kevin Hassett, the leading candidate to succeed Jerome Powell as Fed Chair, like President Donald Trump, has called for interest rate cuts. U.S. interest rate futures indicate an 85% chance of a rate cut in December, according to the CME Group's FedWatch tool.

Non-yielding gold tends to perform well in a low-interest-rate environment. Data on Wednesday showed a decline in weekly jobless claims last week, although the labor market struggles to provide enough job opportunities for the unemployed. U.S. consumer confidence also fell in November due to concerns about jobs and households' financial outlooks.

Other precious metals followed gold's downward trend on Thursday, with spot silver falling 0.6% to $53.04 per ounce, while platinum gained 2.3% to $1,624.75, and palladium lost 0.3% to $1,419.0.

Precious metals analysts at global investment site noted that gold prices dipped slightly in Asian trading on Thursday, retreating modestly after a strong performance this week, as market confidence grows that the U.S. Federal Reserve will cut interest rates in December.

Speculation about a potential successor to Fed Chair Jerome Powell, who may be more cautious, has also bolstered long-term expectations for U.S. interest rate cuts, alongside a series of weak economic data from the country.

The U.S. dollar weakened on this notion, benefiting metal prices overall this week. Silver performed notably, returning to record high levels, while platinum outperformed gold on Thursday.

Expectations of interest rate cuts and safe-haven demand have boosted gold prices. Spot gold has risen over 2% this week, achieving strong gains as traders estimate increasing chances of the Fed cutting interest rates next month.

Data showed that markets expect a 79.8% chance of the Fed cutting rates by 25 basis points during its meeting on December 9-10, a significantly higher probability than the 24% recorded last week.

This comes as two Federal Reserve policymakers expressed their support for a rate cut in December. A series of weak U.S. economic data has also reinforced the idea that the Fed will lower rates to mitigate further economic weakness.

Limited progress indicators towards a U.S.-mediated ceasefire between Russia and Ukraine, along with rising tensions between Japan and China, have also stimulated demand for gold as a safe haven. Lower interest rates tend to enhance the appeal of non-yielding assets like gold, as investors typically avoid government debt in such an environment.

Reports last week indicated that Kevin Hassett, director of the National Economic Council at the White House, is considered the leading candidate to chair the Fed, succeeding Powell after his term ends in May 2026. Hassett is seen as a close ally of President Donald Trump and is widely expected to implement the president's demands for sharp interest rate cuts, more than Powell himself.

Analysts at ANZ Bank noted in a memo: "The director of the National Economic Council at the White House is a close ally of the U.S. president and is likely to be viewed as the person who will apply the president's approach to interest rate cuts at the Fed."

Trump has called for significant interest rate cuts to boost the U.S. economy, although the Fed has largely rebuffed his calls, exercising caution regarding persistent inflation. However, many Fed officials said last week that cutting rates to support the labor market takes direct priority over persistent inflation, and price pressures are also likely to ease in the coming months.