Gold Retreats as Investors Book Profits; Focus Shifts to Fed Policy

Gold prices retreated on Tuesday, snapping a recent rally as investors moved to lock in profits following Monday’s surge to six-week highs. Despite the pullback, sentiment remains broadly supported by strengthening expectations of a Federal Reserve interest rate cut next week and robust central bank demand.

Market Action Spot gold fell over 1% to trade near $4,186.89 per ounce, while U.S. gold futures for February delivery settled 1.3% lower at $4,220.80. The correction comes as the U.S. Dollar (DXY) stabilized around 99.45, pausing a five-day losing streak, and Treasury yields firmed slightly, creating headwinds for the non-yielding metal.

Analysts characterize the move as a technical correction rather than a shift in sentiment. "It's probably just a little bit of profit-taking," noted Peter Grant, Senior Metals Strategist at Zaner Metals. "The market's biggest focus of late has been rate cut expectations, and those remain pretty steady."

The Fed Factor The downside for precious metals appears limited by the macroeconomic backdrop. Following soft manufacturing data released Monday—where the ISM Manufacturing PMI slipped to 48.2, marking a ninth month of contraction—markets have priced in an approximate 89% probability of a 25-basis-point rate cut at the upcoming Fed meeting.

Investors are now turning their attention to a slate of critical economic data due later this week, including Wednesday's ADP employment report and Friday’s Personal Consumption Expenditures (PCE) Index, the Fed's preferred inflation gauge.

Fundamental Support & Long-Term Outlook Beyond immediate monetary policy, structural drivers for gold remain intact.

Central Bank Buying: The World Gold Council reported that global central banks purchased a net 53 tons of gold in October, the highest monthly level of 2025.

Geopolitical Risk: Fragile peace discussions regarding the Russia-Ukraine conflict continue to underpin safe-haven demand.

Institutional Forecasts: Major financial institutions remain bullish. A recent Goldman Sachs poll indicates significant investor confidence in gold extending gains, with Bank of America and Deutsche Bank projecting prices could reach $5,000 per ounce by 2026.

Silver and PGMs The broader metals complex also faced pressure. Silver retreated from Monday’s record high of $58.83, easing to $57.90 per ounce. However, the grey metal remains up over 100% year-to-date, with analysts at Commerzbank citing tight inventories in Shanghai as a catalyst for a potential move toward $59 next year.