Gold edges higher on global interest rate prospects

Gold prices rose in the European market on Wednesday, resuming gains that were temporarily interrupted yesterday, and moved higher toward a two-month high, supported by increased buying of the metal as one of the best alternative opportunities, as weak inflation data continue to emerge across major economies, boosting expectations of continued global interest rate cuts.

Those gains were capped by the US dollar entering a short-term recovery cycle from two-and-a-half-month lows, as markets await the release of key US inflation data on Thursday.

Price Overview

• Gold prices today: Gold rose by about 0.95% to $4,342.54, from an opening level of $4,302.57, and recorded a low of $4,301.63.

• At Tuesday’s settlement, gold prices fell by 0.1%, marking the first loss in six sessions, amid correction and profit-taking operations from a two-month high at $4,353.59 per ounce.

Global Interest Rates

Weak inflation data continue to emerge across major economies, with Canadian inflation coming in below market expectations and UK inflation falling to its lowest level in eight months, highlighting a continued easing of inflationary pressures on major global central banks, and reinforcing expectations that these banks will continue cutting interest rates in 2026.

The Bank of England is set on Thursday to cut UK interest rates by 25 basis points to a range of 3.75%, the lowest level since December 2022, in the fourth easing step this year.

The US Dollar

The dollar index rose on Wednesday by around 0.45%, as part of a recovery from a two-and-a-half-month low, on track to post its first gain in three sessions, reflecting a broad rebound in the US currency against a basket of global currencies.

Beyond buying from low levels, the recovery in the US dollar comes amid easing inflationary pressures on major global central banks, in addition to the rise in the US unemployment rate, which reinforces expectations of interest rate cuts by the Federal Reserve in 2026.

US Interest Rates

• According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the January 2026 meeting currently stands at 78%, while pricing for a 25-basis-point rate cut stands at 22%.

• Investors are currently pricing in two US interest rate cuts over the course of next year, while Federal Reserve projections point to one cut of 25 basis points.

• To reprice these probabilities, investors are closely monitoring the release of further US economic data, along with comments from Federal Reserve officials.

• Key US inflation data for November will be released on Thursday, providing further strong evidence on the path of US monetary policy in 2026.

Gold Outlook

Bob Haberkorn, senior market strategist at RJO Futures, said that US labor market data give the Federal Reserve more reasons to cut interest rates, and if rates are cut, this would be a positive signal for gold — this is how the market is currently interpreting it.

SPDR

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Tuesday, keeping the total at 1,051.69 metric tons.