Gold prices edged lower on Tuesday as soft U.S. retail sales data reinforced expectations that the Federal Reserve will deliver another interest rate cut in December. Despite the slight pullback, gold remains near recent highs after dovish signals from central bank officials boosted market confidence in further monetary easing.
Market Reaction to Economic Data
Spot gold dipped 0.21% to $4,130.67 per ounce after touching its strongest level since mid November. U.S. gold futures for December delivery settled 1.1% higher at $4,140 per ounce. The moves followed weaker than expected U.S. retail sales figures for September and a Producer Price Index that rose 2.7% year over year, matching August’s pace.
Peter Grant, vice president and senior metals strategist at Zaner Metals, noted that the fresh data did not alter traders’ optimism. “There’s revived hope for a December rate cut based on recent dovish Fed speak, and this data doesn’t seem to be changing that,” he said.
Growing Expectations of Monetary Easing
Market forecasts have shifted sharply in recent days. According to CME Group, traders now see an 85% probability of a Fed rate cut in December, up from roughly 50% the previous week. Expectations for an additional reduction in January also rose, with odds climbing to 65%.
Federal Reserve Governor Stephen Miran said Tuesday that a weakening job market supports the case for further easing, echoing similar comments from Governor Christopher Waller earlier in the week. Such remarks have strengthened the outlook for lower borrowing costs heading into early 2026.
Supportive Conditions for Gold
Gold, a non yielding asset, typically benefits when interest rates fall, as lower yields reduce the opportunity cost of holding the metal. Analysts say the broader macroeconomic backdrop remains favorable. “The underlying conditions of ongoing economic uncertainty, geopolitical turbulence and dovish Fed expectations continue to support gold prices in the near term,” said Ricardo Evangelista of ActivTrades.
With economic indicators softening and policymakers signaling further accommodation, gold is positioned to stay resilient as investors seek stability amid shifting financial conditions.
