Gold drops amid reduced Fed rate-cut bets

Gold prices slipped to around $4,010 per ounce on Tuesday, extending their decline for a fourth straight session as expectations for an imminent US interest rate cut continued to fade.

The market has been operating with unusually limited visibility, as six weeks of delayed US economic data—a consequence of the prolonged government shutdown—left investors without the usual indicators they rely on to gauge economic momentum.

This data vacuum, combined with a string of hawkish remarks from Federal Reserve officials, has steadily eroded confidence in the likelihood of a December rate cut.

On Monday, Fed Vice Chair Philip Jefferson acknowledged that downside risks to employment have grown relative to inflation risks, but emphasized that the central bank must move “slowly” and carefully in considering further policy easing. His comments echoed the tone of other policymakers who have stressed patience and caution, reinforcing the market’s view that the Fed is not yet ready to pivot decisively toward looser policy.

Investors are now anxiously awaiting the September non-farm payrolls report, set for release on Thursday, which is expected to offer the first comprehensive snapshot of labor-market conditions since the shutdown.

A softer-than-expected print could revive rate-cut bets, while a resilient reading would likely cement the Fed’s more cautious stance. Ahead of that, the publication of the Federal Reserve’s latest meeting minutes on Wednesday will be scrutinized for clues on how deeply concerns about inflation, employment, and financial conditions are shaping the committee’s thinking.

For now, markets are pricing in only a 46% chance of a 25-basis-point rate cut in December, sharply lower than the more than 60% probability just one week ago. With uncertainty high and the return of delayed data likely to inject volatility into markets, gold remains under pressure in the short term, even as broader macro risks continue to support its long-term appeal.