US Economy Confuses Gold Market
US Economy Confuses Gold Market
Gold prices strengthened in the Asian session on Friday, supported by growing concerns about the US economic outlook, which prompted a rush to safe-haven assets. The precious metal also headed for its first weekly gain in four weeks, having comfortably returned above the psychological level of USD 4,000 per troy ounce. However, gold's upside potential remains restrained as the market begins to scale back expectations of a Fed interest rate cut at its December meeting.
Throughout the week, spot gold prices rose around 5%, helped by buying interest as a hedge against the uncertainty of the US economic outlook. The nearly 43-day US government shutdown has ended, and the government is expected to release official economic data again in the coming weeks. However, market participants are concerned that the upcoming data could reflect a deeper economic downturn due to the shutdown's impact. US government officials even hinted that inflation and labor market data for October might not be released at all.
Meanwhile, other precious metals also strengthened and recorded solid weekly performances. Spot platinum rose around 0.5% to around USD 1,593 per ounce, while silver strengthened 1.1% to around USD 52.88 per ounce. Throughout the week, silver was the star performer, surging around 9% and returning to near the record high touched in October, confirming strong investor interest in the precious metals sector as a whole.
From a policy perspective, unclear data has limited the Fed's actions ahead of its December meeting. The market now sees only a 45% chance of a 25 basis point interest rate cut, down sharply from around 64% last week, while the chance of a "hold rate" has risen to around 55%. Recent comments from Fed officials, such as San Francisco Fed President Mary Daly, who believes it is too early to decide on a cut, have reinforced this cautious stance. Interestingly, the US dollar has not received much support from the decline in interest rate cut expectations and has weakened by around 0.4% over the week, thus indirectly supporting the rise in gold and other precious metal prices. (Asd)
Source: Bloomberg.com
