Gold steadies on Fed rate cut expectations after three-day fall

Core Viewpoint - Gold prices have stabilized after a three-day decline, with expectations of a Federal Reserve interest rate cut driving dip-buyers back into the market [1][3]. Group 1: Market Performance - Gold held steady near $3,950 an ounce after a loss of over 4% in the previous three sessions, with a widely anticipated 25-basis-point interest rate cut expected from the Federal Reserve [1]. - Following a significant rally that peaked above $4,380 an ounce, gold has retreated sharply, attributed to technical indicators suggesting the price increase was unsustainable and reduced demand for safe-haven assets amid improving US-China trade relations [2][3]. - Despite the recent pullback, gold prices are still up approximately 50% year-to-date, supported by central bank purchases and a trend of investors seeking alternatives to sovereign debt and currencies due to budget deficits [3]. Group 2: Investor Behavior - The surge in gold prices attracted both institutional and retail investors to gold-backed exchange-traded funds (ETFs), although recent outflows have impacted this support, with a net withdrawal of $1 billion from State Street's SPDR Gold Shares, marking the largest outflow since April [4]. - Total investor holdings in gold ETFs have seen their most significant decline in six months, indicating a shift in market sentiment [4]. Group 3: Market Outlook - Analysts suggest that gold's role as a hedge against fiscal and policy uncertainty remains strong, although the recent exuberance has transitioned to a phase of consolidation [5]. - A range of $3,920 to $4,020 an ounce is seen as critical for potential base-building before another upward movement, with concerns that failing to maintain this range could lead to further sell-offs [5]. - A survey at the London Bullion Market Association's conference indicated a bullish outlook, with attendees projecting gold prices could reach nearly $5,000 an ounce within a year [5].