Gold climbed more than 2% on Monday as expectations of another US rate cut grew following last week’s release of soft economic data and a tentative deal to end the longest government shutdown in American history.
Spot gold shot above the $4,100-an-ounce level during the morning trading, before pulling back slightly to around $4,085 an ounce for a 2.1% intraday gain. US gold futures had a similar rise, trading at about $4,094 per ounce in New York.
The rally coincides with increased market expectations of a Federal Reserve rate cut next month, after employment and consumer reports last week both showed signs of economic slowdown. A potential end to the US government shutdown could add further clarity through unlocking the release of official data.
“A reopening would restore data flow and revive expectations for a December rate cut, but more importantly, it shifts market focus back to the deteriorating US fiscal outlook,” Ole Hansen, commodities strategist at Saxo Bank, wrote in a note to Bloomberg.
“Rising yields driven by fiscal anxiety, rather than economic strength, have historically been supportive for investment metals,” he added, in reference to gold’s role as a safe haven during economic uncertainty.
So far this year, gold has risen more than 50% on the back of elevated safe-haven demand and central bank buying. In mid-October, prices hit a record of nearly $4,381 an ounce, but have since retreated by about 6%.
However, Saxo Bank’s Hansen also warned that while the revived possibility of official data releases supports a rate cut, Treasury yields were broadly higher across the curve, a move that is more reflective of US debt sustainability concerns than an expectation of tighter monetary policy.
Markets currently see a 67% chance of a rate cut in December, with odds climbing to about 80% by January, according to CME Group’s FedWatch tool.
(With files from Bloomberg)
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Gold climbed more than 2% on Monday as expectations of another US rate cut grew following last week’s release of soft economic data and a tentative deal to end the longest government shutdown in American history.
Spot gold shot above the $4,100-an-ounce level during the morning trading, before pulling back slightly to around $4,085 an ounce for a 2.1% intraday gain. US gold futures had a similar rise, trading at about $4,094 per ounce in New York.
The rally coincides with increased market expectations of a Federal Reserve rate cut next month, after employment and consumer reports last week both showed signs of economic slowdown. A potential end to the US government shutdown could add further clarity through unlocking the release of official data.
“A reopening would restore data flow and revive expectations for a December rate cut, but more importantly, it shifts market focus back to the deteriorating US fiscal outlook,” Ole Hansen, commodities strategist at Saxo Bank, wrote in a note to Bloomberg.
“Rising yields driven by fiscal anxiety, rather than economic strength, have historically been supportive for investment metals,” he added, in reference to gold’s role as a safe haven during economic uncertainty.
So far this year, gold has risen more than 50% on the back of elevated safe-haven demand and central bank buying. In mid-October, prices hit a record of nearly $4,381 an ounce, but have since retreated by about 6%.
However, Saxo Bank’s Hansen also warned that while the revived possibility of official data releases supports a rate cut, Treasury yields were broadly higher across the curve, a move that is more reflective of US debt sustainability concerns than an expectation of tighter monetary policy.
Markets currently see a 67% chance of a rate cut in December, with odds climbing to about 80% by January, according to CME Group’s FedWatch tool.
(With files from Bloomberg)
Sponsored: Secure your wealth today — buy gold bullion directly through our trusted partner, Sprott Money.