Gold Climbs Toward New Record High While Crypto and Stocks Retreat

Cryptocurrency Market Under Pressure

Meanwhile, a sharp overnight drop in Bitcoin’s price triggered a broader decline across the cryptocurrency market. As a result, the total market capitalization of all cryptocurrencies fell by more than 6% during the day, decreasing from $3.191 trillion to approximately $3.016 trillion.

Bitcoin itself declined 6% and is currently trading just below $86,000, according to CoinGecko data. This movement reflects a cautious mood among investors in the highly volatile digital asset market.

At the same time, the S&P 500 index slipped 0.5% in premarket trading. This decline suggests a reduction in risk appetite among US equity investors, particularly amid continued uncertainty regarding the future direction of monetary policy.

He further noted that speculation surrounding the next Federal Reserve chair potentially adopting a more dovish stance has also strengthened demand for gold as a traditional safe haven.

Rate Cut Expectations and Market Caution

Although the probability of a quarter-point rate cut in December stands at approximately 88%, according to the CME FedWatch tool, investors remain cautious. This hesitation is partly driven by data gaps caused by the recent government shutdown, which have limited economic visibility.

Similarly, users of Dastan’s Myriad forecasting market estimate the probability of a 25-basis-point Fed rate cut at 86% in December. However, expectations that Jerome Powell will step down as Fed chair by year-end remain low, at just 9%.

“Many investors are either adopting a risk-averse stance or preferring to wait and see”, Otishchenko explained. He added that the upcoming ADP jobs report on Wednesday and the core personal consumption expenditures (PCE) data on Friday should provide clearer signals regarding the Federal Reserve’s next steps.

Quantitative Tightening and Liquidity Concerns

Regarding the possibility of the Federal Reserve ending quantitative tightening, Otishchenko stated that risky assets currently appear weaker because the anticipated liquidity boost from ending quantitative tightening would take time to flow into financial markets.

Quantitative tightening refers to a shift in monetary policy in which the central bank reduces its balance sheet by shrinking the money supply. This process typically involves allowing assets such as Treasury bonds and mortgage-backed securities to mature without reinvesting the proceeds. Consequently, liquidity gradually declines, tightening overall financial conditions over time.