Gold prices continued their upward trajectory for the fourth consecutive day, fueled by a weakening US dollar and growing anticipation that the end of the government shutdown in the United States, coupled with forthcoming economic data, will bolster expectations of a US interest rate cut next month.
The US Senate recently approved a compromise agreement aimed at resolving the longest government shutdown in US history. This development is expected to bring an end to the weeks-long impasse that has disrupted food assistance programs for millions of citizens, left hundreds of thousands of government employees without pay, and caused significant disruptions to air travel.
Spot gold rose by 0.4% to $4,142.70 per ounce by 00:12 GMT, having reached its highest level since October 23rd on Tuesday. US gold futures for December delivery also experienced a significant increase, climbing by 0.8% to $4,149.20 per ounce.
Concurrently, the dollar index declined for the fifth consecutive session, making gold a more attractive investment for holders of other currencies. The weakening dollar has historically had an inverse relationship with gold prices. A weaker dollar makes gold, which is priced in dollars, less expensive for investors holding other currencies, thus increasing demand and pushing prices higher.
Analysts are closely watching upcoming economic data releases, particularly those related to inflation and employment, as these figures will likely influence the Federal Reserve’s decision regarding interest rate policy. A weaker-than-expected economic performance could strengthen the case for an interest rate cut, further supporting gold prices. Conversely, strong economic data could temper expectations of a rate cut and potentially put downward pressure on gold.
The resolution of the US government shutdown has also instilled a sense of optimism in the market, as the return of government services and the resumption of economic data collection are expected to provide a clearer picture of the US economic outlook. However, some analysts caution that the long-term impact of the shutdown on the economy remains to be seen.
