Gold prices edged lower in Asian trade on Thursday, pulling back marginally after a strong performance this week as markets grew more confident that the U.S. Federal Reserve will cut interest rates in December.

Speculation over a potentially dovish successor to Fed Chair Jerome Powell also boosted expectations of lower U.S. interest rates in the long term, as did a swathe of weak economic readings from the country.

The dollar retreated on this notion, benefiting broader metal prices this week. Silver was a standout performer, coming back in sight of record highs, while platinum outperformed on Thursday.

Spot gold fell 0.3% to $4,152.35 an ounce by 00:08 ET (05:08 GMT), while gold futures fell 0.4% to $4,184.15/oz.

Rate cut bets, haven demand boost gold prices
Spot gold was trading up more than 2% this week, having clocked strong gains as traders priced in increasing odds that the Fed will cut rates next month.

Markets are pricing in a 79.8% chance the Fed will cut rates by 25 basis points during its December 9-10 meeting, up sharply from a 24% chance seen last week, CME Fedwatch showed.

This came as two Fed policymakers spoke in support of a December cut. A swathe of weak U.S. economic prints also spurred the notion that the Fed will cut rates to stem further weakness in the economy.

Signs of limited progress towards a U.S.-brokered ceasefire between Russia and Ukraine, coupled with heightened tensions between Japan and China, also helped spur safe haven demand for gold.

Other precious metals tracked gold lower on Thursday, with spot silver falling 0.7% to 52.9525/oz after coming in sight of record highs earlier. Spot platinum jumped 1.7% to $1,616.76/oz, although the immediate reason behind the bounce was unclear.

Lower rates tend to brighten the appeal of non-yielding assets such as gold, given that investors usually pivot out of government debt in such an environment.

Fed Chair succession in focus
Bloomberg reported this week that White House National Economic Council Director Kevin Hassett is seen as the frontrunner to become the next Fed Chair, replacing Powell after the latter's term ends in May 2026.

Hassett is viewed as a close ally of President Donald Trump, and is widely expected to carry out the president's demands for sharply lower interest rates, more so than Powell.

"The White House National Economic Council Director is seen as a close ally of the US President and would likely be perceived as someone who would bring the president's approach to interest-rate cutting to the Fed," ANZ analysts said in a note.

Trump has called for substantially lower interest rates to boost the U.S. economy, although the Fed has largely rejected his calls on caution over sticky inflation.

But several Fed officials said in the past week that cutting rates to support the labor market took immediate precedence over sticky inflation, and that price pressures were also likely to cool in the coming months.

Source: Investing.com