Gold Finds Stability After Two-Day Decline
Gold prices steadied on Monday following two consecutive days of losses, as optimism faded regarding potential interest rate cuts by the US Federal Reserve next month. The precious metal traded slightly below $4,100 per ounce, recovering from a more than 2% drop in the previous trading session.
Fed Officials Temper Rate Cut Expectations
Market expectations for another rate reduction were scaled back significantly last week as Federal Reserve officials demonstrated little conviction for lowering borrowing costs. This shift in sentiment has directly impacted gold's appeal, since lower interest rates typically make non-yielding bullion more attractive to investors seeking safe-haven assets.
Traders and policymakers are currently navigating through a backlog of economic data that accumulated during the longest US government shutdown in history. The six-week absence of reliable statistics covering critical indicators like labor market conditions and inflation in the world's largest economy has made some officials increasingly hesitant to commit to another rate cut in December.
Market Sentiment Divided on December Rate Decision
The trading community now appears split on the likelihood of a December rate reduction, marking a dramatic shift from less than a month ago when markets had almost completely priced in a quarter-point cut. Hebe Chen, a strategist at Vantage Markets in Melbourne, captured the current market uncertainty perfectly: "The shutdown is over, but the data fog it created is still clouding markets — the next few weeks will deliver numbers we barely have a handle on."
Despite recent volatility, gold maintains an impressive 55% gain this year and remains on track for its best annual performance since 1979. The metal's scorching rally to a record high above $4,380 last month has been underpinned by elevated central-bank purchases, while investors continue piling into precious metals as protection against growing fiscal concerns in several of the world's largest economies.
Long-Term Outlook Remains Positive
Chen further elaborated on gold's prospects: "Despite a minor pullback, gold's medium-to-long-term trend remains intact, supported by softening dollar expectations and investors favoring safety as both the near- and long-term outlooks stay blurred."
As of 9:04 a.m. in Singapore, gold edged up 0.1% to $4,088.16 per ounce, while the Bloomberg Dollar Spot Index also climbed 0.1%. In related precious metals trading, silver and palladium registered gains, while platinum remained unchanged.
