Fed's rate cut probability in December rises to 72%: gold price falls, Bitcoin rebounds

Due to Fed official John Williams hinting at a possible rate cut in December, market expectations for a Fed rate cut rose to 72%, and gold prices fell to $4052-4065 per ounce.

On Monday during the Asian trading session, gold prices fell as traders shifted their focus to higher-risk assets, following market expectations that the Fed would cut interest rates in December. Spot gold dropped 0.3%, closing around $4052-4065 per ounce. Meanwhile, “digital gold” Bitcoin finally saw a rally, briefly rising to $88,000 before giving back some gains, currently sitting around $86,000.

John Williams, the president of the New York Fed, stated last Friday that interest rate cuts would not threaten the central bank's inflation target, a comment that changed market sentiment. Williams pointed out that the potential risks facing the labor market are reasons to lower borrowing costs.

His remarks triggered a sharp reversal in trader sentiment. The probability of the Fed lowering interest rates by 25 basis points at the meeting on December 9-10 has risen to 67% to 72%. Just last week, traders believed the likelihood of a rate cut in December was only 40%.

Low interest rates generally support gold prices, as gold does not generate returns like bonds or savings accounts. When interest rates fall, the opportunity cost of holding gold also decreases. The dollar exchange rate is close to the six-month high reached last Friday. A stronger dollar means that buyers purchasing gold with other currencies need to pay a higher price. Although the outlook for interest rate cuts has improved, this dynamic limits the upside potential for gold. (CoinCentral)