Gold Price Forecast: XAU/USD holds positive ground above $4,100 as Fed rate cut expectations rise

• Gold price drifts higher to around $4,120 in Tuesday’s early Asian session.

• Market participants are betting on a 25 bps Fed rate reduction next month, partly due to weak job market data.

• US Senate compromise sets the stage for an end to the US federal shutdown. 

Gold price (XAU/USD) holds positive ground near $4,120 during the early Asian session on Tuesday. The precious metal edges higher after reaching a two-week high in the previous session, amid prospects for rate cuts by the US Federal Reserve (Fed) in December and a softer US Dollar (USD). The US ADP Employment Change Weekly will be in the spotlight later on Tuesday.

The rally in yellow metal is bolstered by increased market expectations of a US rate cut next month after private jobs and consumer reports last week both showed signs of economic slowdown. Markets are currently priced in nearly a 67% chance of a 25 basis points (bps) rate cut by the Fed in December, with odds rising to about 80% by January, according to the CME FedWatch tool. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.

On the other hand, hopes for the end of the US government shutdown and positive market sentiment could undermine the safe-haven asset like Gold. Reuters reported that the US Senate on Sunday moved forward on a measure aimed at reopening the federal government and ending the shutdown, which has affected federal workers, food aid, and air travel. 

US President Donald Trump on Monday expressed support for the bipartisan deal to end the US shutdown, saying “we have support from enough Democrats, and we’re going to be opening up our country.” Given that the House needs to return to Washington and has vowed to give lawmakers advance notice, the government will most likely reopen by the end of the week.