Gold held steady amid disagreements among three Federal Reserve policymakers over the next interest rate cut next month, with the U.S. dollar trading near its highest level in months.

The price of bullion held near $4,000 an ounce, after fluctuating between gains and losses on Monday. Fed Chair Lisa Cook said she sees the risk of further labor market weakness as greater than the risk of rising inflation, but refrained from committing to another interest rate cut in December.

These comments echoed those of her colleagues, Mary Daly and Austan Goolsbee. Governor Stephen Miran, on the other hand, said monetary policy remains restrictive and that he will continue to advocate for substantial interest rate cuts.

The precious metal rallied to a record high in the middle of last month, before weakening amid concerns that the commodity's rise was too rapid. Traders are watching to see if the rally will continue, with the outlook partly shaped by the Fed, as looser U.S. monetary policy makes non-yielding gold more attractive. After two recent rate cuts, policymakers will gather next month for their final scheduled meeting of the year.

"There's a risk we see the Fed try to moderate expectations for a rate cut a bit," said Kyle Rodda, an analyst at Capital.com Inc. "The odds have been declining since last week, and the timing has shifted. If that trend continues, I think it could continue to weigh on gold prices."

Late last month, Fed Chairman Jerome Powell also warned investors against assuming the U.S. central bank would cut rates again in December—a statement that appeared aimed at tempering market expectations.

Traders now see about a two-thirds chance the Fed will ease policy next month, a more hawkish view than two weeks ago, according to Bloomberg calculations derived from futures prices. Bullion fell 0.2% to $3,993.86 an ounce at 9:21 a.m. in London. The Bloomberg Dollar Spot Index edged higher after closing at its highest level since July on Monday. Silver, platinum, and palladium all weakened.

Gold prices closed little changed on Monday after China announced on Saturday that some retailers would no longer be able to fully offset value-added tax on inputs when selling some products. The move has cast a shadow over the demand outlook as it remains unclear how the regulation will be implemented in practice. (alg)

Source: Bloomberg