Gold prices retreated on Tuesday as traders locked in profits following a sharp rally that pushed the metal to a six-week high. The pullback comes as markets brace for what could be the Federal Reserve’s most consequential rate decision in months, with investors now pricing in an 88% probability of a 25-basis-point cut next week. Amid weakening U.S. economic data and a growing chorus of dovish commentary from Fed officials, gold’s recent surge underscores how tightly the precious-metal market has become tethered to shifts in monetary expectations.

Profit Taking Emerges After a Strong Multi-Week Rally

After touching a high on Monday not seen since late October, gold fell to $4,210 per ounce in early trading on Tuesday, easing from levels that had climbed nearly 6% over the past month. A separate reading in CFD markets showed gold at $4,224.90 per ounce as of December 2, down 0.16% from the prior session. While the decline was modest, it reflected an uptick in profit taking as traders moved to secure gains ahead of a dense week of economic catalysts.

Despite the pullback, gold remains one of the standout performers of 2025, having risen nearly 60% year over year and setting an all-time high of $4,381.58 in October. The metal’s strength reflects a mix of macro pressures—persistent inflation uncertainty, geopolitical tensions, and shifting central-bank policy—along with robust demand from sovereign buyers seeking diversification away from the U.S. dollar.

Weak U.S. Data Reinforces Expectations of Near-Term Easing

The immediate trigger for heightened rate-cut speculation came from Monday’s U.S. manufacturing data, which showed the sector contracting for a ninth consecutive month in November. The persistent weakness adds to concerns that higher borrowing costs are beginning to weigh more heavily on economic activity, pushing the Fed closer to resuming its easing cycle.

Comments from Fed officials last week also tilted dovish, with several noting risks to growth and signaling flexibility should data continue to soften. Markets are now looking to Chair Jerome Powell’s upcoming remarks for clarity on whether the central bank intends to validate market expectations or push back against the increasingly aggressive pricing of monetary easing.

A Crucial Week for Gold as Traders Track the Data Calendar

Beyond Powell, investors are awaiting a series of key releases that could influence gold’s near-term trajectory. The ADP employment report and the long-delayed September PCE data—the Fed’s preferred inflation gauge—are expected to provide important insight into the state of labor conditions and inflation momentum. Any sign of cooling could deepen bets on multiple rate cuts in early 2026, potentially driving renewed strength in gold.

Still, the metal’s recent rally raises questions about sustainability. With prices sitting near historic highs, the market remains vulnerable to swift corrections if economic data surprises to the upside or if the Fed signals caution about cutting too soon. For now, gold’s price action suggests traders are building positions around an easing cycle but remain sensitive to the timing and magnitude of policy changes.