Gold Slips As Rate Cut Hopes Diminish, U.S.-China Tensions Ease

(RTTNews) - Gold prices edged lower on Friday as diminishing expectations of another Federal Reserve rate cut combined with easing trade tensions between the U.S and China continued to reduce demand for the precious metal.

Front Month Comex Gold for November delivery declined by $19.10 (or 0.48%) to $3,982.20 per troy ounce.

Front Month Comex Silver for November delivery slumped by 43.40 cents (or 0.90%) to $47.994 per troy ounce.

Despite giving back some ground this week, gold skyrocketed by $141.40 (or 3.68%) per troy ounce in October, increasing for the third consecutive month. Silver increased for the sixth consecutive month, soaring by $1.7410 (or 3.76%) per troy ounce in October.

Despite the non-availability of official data due to the ongoing government shutdown - which would have given a broader picture of the U.S. economic scenario - the U.S. Federal Reserve reduced interest rates by a quarter of a percentage point on October 29 to bring the rates down to a range of 3.75% to 4.00%.

Following the announcement of the rate cut, U.S. Federal Reserve Chair Jerome Powell warned that another rate cut in December is "not a foregone conclusion." Powell also stressed that the Fed officials have strongly divergent opinions on how to proceed.

Today, Kansas City Fed President Jeff Schmid and Dallas Fed President Lorie Logan elaborated on their reasons for opposing rate cuts wherein they emphasized that inflation is not showing signs of lowering.

These remarks gave some carry-over support to the greenback as a result of which the yellow metal became more costly for foreign buyers and lost some ground.

U.S.-China trade tensions eased after the recent meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea, where both leaders agreed to extend the tariff truce. Overall U.S. tariff rates on Chinese imports now stand at 47% from an earlier 57%.

Even though investors cautiously viewed these steps as temporary, they are optimistic about economic growth in the near-term. This also reduced demand for the safe-haven metal.

Meanwhile, Trump has called on Republicans to invoke the "Nuclear Option" to end the shutdown. Of note, the "nuclear option" in the U.S. Senate is a parliamentary procedure which would offer powers to the Senate to amend rules (governing the filibuster) by a simple majority vote (51) instead of the usually required two-thirds super-majority (67).

On the geopolitical front, in the intensifying Russia-Ukraine war, Ukraine's emergency services stated that Russia launched an overnight attack on the northeastern Ukrainian city of Sumy, injuring 11 residents.

In the Middle East, despite Trump's assurance that the Gaza Peace Plan and the ceasefire still hold, recent attacks on Gaza by Israel raise concerns if the truce may be more fragile than expected.

CME Group's FedWatch Tool is currently indicating a 63.0% chance of a 25-basis-point interest rate cut at the Federal Reserve's upcoming December 9-10 meeting.