Can Gold Hold Above $4,200 as Fed Prepares Hawkish Rate Cut Signal?

Gold trades near the critical $4,200 level with bears in control during Tuesday’s Asian trading hours. The yellow metal faces renewed selling pressure as market participants brace for a more restrictive Fed guidance despite an anticipated rate reduction.

Market Pricing Shifts Toward Rate Cut

Market expectations have shifted dramatically over recent weeks. Traders are now pricing in a 90% probability of a 25 basis point rate cut in December, according to the CME FedWatch tool—a significant jump from the 66% probability seen in November. This increase in expectations reflects growing confidence that the Fed will indeed ease policy in the coming month.

However, the critical factor isn’t just whether a cut happens, but how policymakers frame it. Analysts warn that the Fed could deliver what’s known as a “hawkish cut”—reducing rates while signaling a pause or slower pace of future reductions. Such messaging could strengthen the US Dollar and simultaneously weigh on the USD-denominated commodity, potentially pushing gold below key support levels including the $4,200 mark.

Employment Data and Policy Guidance in Focus

Tuesday’s session brings two significant US employment reports: the ADP Employment Change four-week average and JOLTS Job Openings figures for September and October. These metrics will provide crucial context for the Fed’s thinking heading into Wednesday’s decision.

Weaker-than-expected employment data could amplify expectations for monetary easing, which would benefit gold by reducing the opportunity cost of holding the non-yielding asset. Conversely, strong labor market readings could embolden Fed officials to adopt a more restrictive posture, dampening gold’s appeal.

The precious metal’s trajectory will largely depend on the Fed’s post-decision press conference and the Summary of Economic Projections, commonly referred to as the “dot-plot,” which will offer fresh insight into rate path expectations.

Safe-Haven Demand and Geopolitical Tensions

Beyond monetary policy mechanics, gold remains supported by its traditional safe-haven characteristics. Escalating tensions between Washington and Kyiv have reignited geopolitical uncertainty, with recent rhetoric between US leadership and Ukrainian officials adding to market caution. In environments of rising uncertainty, investors often rotate into defensive assets like gold, providing a potential floor for prices.

The interplay between Fed tightening signals, labor market strength, and global tensions will determine whether gold can stabilize near the $4,200 level or continues its pullback in the near term.