Gold Slides Under $4,200 as Traders Navigate Fed Policy Expectations and Employment Data

XAU/USD retreats to approximately $4,195 during early Tuesday trading in Asia, signaling downward pressure as market participants reassess their positions ahead of critical central bank communications.

Market Expectations Shift on Rate Cut Probability

The probability landscape has changed dramatically. According to CME FedWatch tracking, traders are now pricing in a 90% likelihood of a 25 basis point rate reduction when the Federal Reserve convenes in December—a substantial jump from the 66% expectation recorded last month. This upward revision in rate cut odds is creating volatility for day trading gold, as intraday price swings intensify around these probability thresholds.

The Hawkish Cut Dilemma

A critical concern weighing on the precious metal is the potential for a “hawkish cut”—a scenario where the Fed delivers rate relief while simultaneously projecting a restrictive policy stance through forward guidance. Should this occur, the resulting strength in the US Dollar could create headwinds for the gold market. As Peter Grant, vice president and senior metals strategist at Zaner Metals, noted: “The market is waiting for the Fed decision and for more guidance on policy.” The accompanying Summary of Economic Projections, or dot-plot, will be instrumental in determining the Fed’s longer-term intentions.

Employment Data May Tip the Balance

Before the Fed’s Wednesday announcement, traders face two significant labor market reports on Tuesday: the ADP Employment Change four-week average and September and October JOLTS Job Openings figures. Should these metrics disappoint relative to expectations, it could strengthen the case for more aggressive rate reductions, potentially bolstering demand for day trading gold as short-term traders capitalize on USD weakness. Conversely, robust employment data would support a more measured approach to rate cuts.

Gold’s Haven Appeal Amid Geopolitical Risks

The recent escalation between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy—stemming from disagreements over peace proposal discussions—underscores the persistent geopolitical uncertainties. These tensions reinforce gold’s traditional role as a safe-haven asset, providing a counterbalance to the dollar-strength headwinds. Combined with lower interest rate scenarios reducing the opportunity cost of holding non-yielding assets, gold retains fundamental support even as near-term technicals remain challenged below $4,200.