Gold prices surged by over 1% on Monday, driven by the anticipation of another Federal Reserve interest rate cut in December and a series of weak economic data that heightened global slowdown concerns. This surge comes as traders and investors eagerly await the Fed's next move, despite the central bank's downplaying of the rate cut's likelihood.
The spot gold price climbed 1.4% to reach $4,053.40 per ounce by 0435 GMT, while U.S. gold futures for December delivery rose 1.3% to $4,062.40 per ounce. KCM Trade Chief Market Analyst Tim Waterer noted, 'Gold is attracting strong bids from traders, with the precious metal rising on the expectation that a rate cut could still occur next month, even though the Fed has been downplaying the chances.'
The U.S. economy faced a challenging October, shedding jobs across the government and retail sectors, while businesses embraced cost-cutting measures and artificial intelligence, leading to a surge in announced layoffs. This trend continued into early November, with U.S. consumer sentiment weakening to its lowest level in nearly 3.5 years due to concerns about the economic impact of the longest-ever government shutdown.
Market participants now predict a 67% chance of a December rate cut, according to the CME FedWatch Tool. Non-yielding gold typically performs well in low-interest-rate environments and during economic uncertainties. The U.S. Senate's recent move to advance a measure for reopening the federal government and ending a 40-day shutdown, which has disrupted federal workers and essential services, adds further uncertainty to the economic outlook.
Waterer commented, 'While the shutdown appears to be ending, this brings greater visibility over key economic indicators, which have been scarce since the shutdown began.' The Gold Trust, the world's largest gold-backed exchange-traded fund, reported a 0.16% increase in holdings to 1,042.06 metric tons on Friday, up from 1,040.35 tons on Thursday.
In addition to gold, silver, platinum, and palladium also saw gains. Spot silver rose 1.8% to $49.18 per ounce, platinum increased 1.3% to $1,565.36, and palladium added 0.7% to $1,389.94.
