Gold trading reminder: the Federal Reserve's December interest rate cut expectations are cooling, and the gold price is under pressure at the $4,000 mark

Spot gold fell nearly 2% on Monday (November 17), hitting a low of $4006.80 an ounce and closing just around $4,045. The main pressure came from the Federal Reserve's further cooling of expectations for a December interest rate cut, with the dollar index rebounding 0.25% to 99.54. A stronger dollar made dollar-denominated gold more expensive for holders of other currencies around the world, and buying was reduced accordingly. David Meger, head of metals trading at High Ridge Futures, said: "Interest rate cut expectations have been significantly reduced, and gold optimism is fading rapidly."

The probability of the Federal Reserve cutting interest rates in December fell to 39% -41%, causing market confidence to suffer

In just one week, the market's expectation of a 25 basis point Fed rate cut in December has fallen from more than 60% to less than 40%. The latest data from CME Group's FedWatch tool shows that the current probability is about 41%, and some quotes have fallen to 39%. There are three main reasons:

1. A number of Federal Reserve officials released hawkish signals, and Vice Chairperson Jefferson made it clear that "further interest rate cuts need to be slowly advanced".

2. Fed Governor Paul Waller, while supporting the December rate cut, stressed that it was only a "risk-managed rate cut" and not that the economy had deteriorated to the point where it had to ease significantly.

3. The market is concerned that the delayed data to be released this week (especially non-farm payrolls in September) may not be as weak as expected, but give the Federal Reserve more reason to hold back.

This week's biggest highlight: September non-farm payrolls report hits

Due to the previous US government shutdown, a large amount of economic data has been delayed, and it will be released this week. Thursday's September non-farm payroll will become the focus of the whole market.

JPMorgan expects to add just 50,000 jobs in September, and if the data is indeed weak, it may leave a sliver of room for a rate cut in December; but Goldman Sachs warned that the data is so lagged that it is of limited significance and "unlikely to resolve the debate about the outlook".

What's more, the White House has said in advance that the October employment report will not include unemployment data, and the October CPI will no longer be released, which will affect the quality of data in the coming months and make it more difficult for the Federal Reserve to make decisions.

US bond yields fell slightly, but it is difficult to change the weak pattern of gold

Yields on 2-year US Treasury bonds fell 1 basis point to 3.606% on Monday, 10-year bonds fell 1.7 basis points to 4.131%, and the yield curve flattened to 52.3 basis points. On the surface, there is some support for gold, but what the market is really worried about is that AI financing risks are spilling over to the entire credit market. Funds are more inclined to return to US bonds as a safe haven than to flow into gold. Gold's "safe haven premium" is being diluted.

The latest views of institutions: short-term pressure, medium and long-term still optimistic

Short-term pessimism is more prevalent, but institutions remain optimistic about the medium to long term.

Scotiabank: average price of $3,450 in 2025 and $3,800 in 2026, on the grounds that real interest rates will eventually decline.

Goldman Sachs: Reaffirming the target of $4,900 by the end of 2026, or even higher, the core logic is that central banks continue to purchase gold on a large scale (net purchase of 64 tons in September, possibly more in November), private investors' demand for decentralized allocation continues to rise, and gold prices have risen by 55% this year.

Goldman Sachs stressed that the main logic of gold's rise is not simply relying on interest rate cuts, but the combination of three factors: "macro uncertainty + financial risks + central bank gold purchases", and interest rate cuts are only short-term catalysts.

Gold's short-term hedging function is slightly inactive

From the perspective of market performance, the pressure brought by the current strengthening of the US dollar and the expected drop in interest rate cuts obviously outweighs other potential positive factors. Gold's safe-haven buying is temporarily difficult to resist the overall selling pressure, and the price is clearly under pressure.

summary

In the short term, the $4,000 round-figure mark is already facing a test. If the non-agricultural data in September this week is unexpectedly strong, or the Federal Reserve meeting notes further strengthen the hawkish tone, the price of gold may drop to the support area of $3,900-3,950. However, the value of gold allocation in the medium and long term is still worthy of attention. The central bank's gold buying trend, the long-term existence of macro uncertainty, and the downward cycle of real interest rates have not changed. Once the expected interest rate cut in December rebounds to more than 50%, gold is still expected to reappearRaise one's headUpward momentum.

There is relatively little economic data this trading day, so investors can continue to pay attention to the speeches of Federal Reserve officials and changes in market expectations for interest rate cuts, and pay attention to fluctuations in relevant expectations.

(Daily chart of spot gold, source: Internet)