Gold fell at the conclusion of the week as the impact of Chinese stimulus faded and global central banks became more cautious.

Gold (XAUUSD) fell to around $2.660 per troy ounce on Friday, as the impact of Chinese government stimulus faded and central banks around the world became less dovish.

Furthermore, better-than-expected data from the United States reduced the probability of the Fed cutting interest rates by another 50 basis points (bps) in November. This puts additional pressure on gold, as projections of slower interest rate declines reflect a high opportunity cost for holding the non-interest-bearing asset. The US dollar is also recovering, adding to the precious metals’ headwinds.

Daily Market Movers:Gold edges lower after setting new record highs.

Gold falls after reaching a new record high of $2,685 on Thursday. As the effect of the additional 1 trillion CNY of stimulus announced by the Chinese Politburo appears to priced in, while central banks around the world tend to pursue a less dovish policy. The Central Bank of Sri Lanka held rates constant during their meeting, while the Swiss National Bank (SNB) and Bank of Mexico (Banxico) lowered rates by merely 25 basis points. A recent Reuters survey, however, found The Reserve Bank of India (RBI) projected to decrease interest rates by 50 basis points during the next six months.

Stronger US labor market and economic growth indicators reduce the likelihood of the Fed easing significantly.

Furthermore, favorable US macroeconomic data has reduced the anticipation that the Fed will decrease interest rates by half a percentage point at its November meeting. US initial jobless claims fell to 218K in the week ending September 20, while the official estimate of Q2 Gross Domestic Product (GDP) growth stayed consistent with earlier estimates at a strong 3.0% annualized. Furthermore, US Durable Goods Orders exceeded expectations, and recent data from the US suggests a soft landing for the economy, contradicting market expectations for strong monetary easing.

The chance of a 50-bps According to the CME FedWatch tool, the probability of a rate decrease at the November Fed meeting has dropped back to 50% from over 60% before the data.

Gold may also see reduced safe-haven flows as expectations that the confrontation between Israel and Hezbollah may escalate into a ground offensive prove unfounded. Although tensions remain high and an American-brokered 21-day ceasefire proposal was rejected on Thursday, the situation has not intensified.

Herzi Halevi, the head of Israel’s Defence Forces, urged his troops on Wednesday to prepare for a ground operation in Lebanon. If such an invasion occurs, it would exacerbate risk aversion and accelerate safe-haven flows into the yellow gold.