Wow! What's Happening Behind Gold's Move
Gold is heading for its best week in a month, driven by renewed uncertainty over official US economic data after the US government resumed operations following a six-week shutdown. Gold prices hovered near USD 4,190 per troy ounce, up about 5% for the week and nearly recouping the previous session's sharp decline.
Expectations for a Fed interest rate cut have weakened slightly this week. Some US central bank officials appear less confident about further lowering borrowing costs. Lower interest rates are usually a welcome boost for gold, as they pay no interest, making them more attractive when yields on other assets decline.
However, investors remain divided. Some believe that the deluge of economic data delayed during the government shutdown could reveal a deep enough weakness to open the door to another rate cut. Others worry that the data might not be that bad, making the Fed feel less compelled to rush into easing policy.
On a year-to-date basis, gold has risen nearly 60% this year and has the potential to post its best annual performance since 1979. Central banks in various countries have increased gold purchases as a store of value and a means of diversifying reserves. Institutional and retail investors have also increased their gold positions as a hedge against fiscal concerns in several major global economies.
Furthermore, gold remains supported by expectations that the Fed will add liquidity to the financial system. New York Fed official Roberto Perli said the central bank "will not wait long" to resume asset purchases to maintain adequate liquidity. Last month, the Fed also announced it would halt its balance sheet reduction starting December 1. In recent trading, gold rose around 0.4% to USD 4,187 per troy ounce, while the dollar index remained relatively flat. Other precious metals such as silver, platinum, and palladium also strengthened. (asd)
Source: Newsmaker.id
