Gold strengthened during Asian trade on Wednesday, advancing to its highest level in nearly two weeks as growing expectations for a December interest rate cut by the United States Federal Reserve pushed the dollar lower and supported demand for the precious metal.
By 3:50 pm AEDT (4:50 am GMT), spot gold was 0.7% higher at US$4,161.88 per ounce.
The latest U.S. economic data released on Tuesday pointed to cooling inflation, offering the Federal Reserve greater room to ease policy.
Several Fed officials also signalled support for a third rate cut this year in December. The shift in outlook has pressured the U.S. dollar to a one-week low, adding further support to non-yielding assets such as gold.
At the same time, the prospect of lower U.S. interest rates has boosted appetite for risk assets more broadly, reflected in stronger global equity markets.
According to the CME Group FedWatch Tool, markets are pricing an 84.9% chance of a 25 basis point rate cut at the Fed's next meeting.
ANZ analysts wrote: "Gold jumped after a report emerged suggesting Kevin Hassett was the frontrunner to be the next Fed chair.
"The White House National Economic Council Director is seen as a close ally of the U.S. President and would likely be perceived as someone who would bring the president’s approach to interest-rate cutting to the Fed."
In addition, optimism surrounding a potential peace deal between Russia and Ukraine is helping to cap further upside, reducing geopolitical risk premiums in the market.
