Gold edges higher as US Federal Reserve prepares to announce rate cut

Gold rose on Tuesday as investors positioned for the widely expected December Federal Reserve rate cut, even as attention shifted to whether policymakers will signal a slower easing path when their two-day meeting begins later in the day.

Spot gold rose 0.4 per cent to $4,208.39 per ounce by 0920 GMT. US gold futures for February delivery rose 0.48 per cent to $4,237.80 per ounce.

Although confidence in further rate cuts by the Fed remains, the signals they have communicated suggest a more gradual and cautious approach to easing, said Linh Tran, market analyst at XS.com.

Markets now assign an 89 per cent chance of a 25-basis-point rate cut when its policy meeting concludes on Wednesday, according to CME's FedWatch Tool, but the focus will be on any signals about the path ahead.

Lower interest rates tend to favour non-yielding assets such as gold.

"There is no change in the overall picture for gold prices except potentially some profit-taking and repositioning ahead of the Fed meeting," said Zain Vawda, analyst at MarketPulse by OANDA.

Analysts widely expect a "hawkish cut" this week accompanied by guidance and forecasts that signal a high threshold for further easing into next year.

Last week, data showed the US Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, landed in line with expectations, while consumer sentiment improved in December.

Private payrolls for November recorded their sharpest drop in more than 2-1/2 years, but jobless claims fell to a three-year low for the week ended November 28.

Meanwhile, silver rose 1.17 per cent to $58.80 per ounce.

The white metal hit a record high of $59.32 on Friday, with analysts citing tight physical supply and depleted inventories as the main drivers of the rally, aided by supportive macro conditions and expectations of Fed rate cuts.

"Into year-end, silver prices could consolidate in a broad $55 to $60 range depending on how monetary policy expectations evolve," said Dat Tong, senior financial markets strategist at Exness.

Platinum gained 0.68 per cent to $1,653.40 per ounce, while palladium rose 0.6 per cent to $1,474.00 per ounce.