Gold Prices Rise to Two-Week High on Fed Rate-Cut Expectations and Slowdown Fears

Gold Prices Extend Gains as Investors Bet on Fed Rate Cut

Gold prices surged to a two-week high on Monday, fueled by renewed optimism that the U.S. Federal Reserve may deliver another interest rate cut in December. Weak U.S. economic data and rising concerns about a potential global slowdown further strengthened safe-haven demand for the precious metal.

As of 06:43 GMT, spot gold climbed 1.8% to $4,070.99 per ounce, marking its highest level since October 27. Meanwhile, U.S. gold futures for December delivery also advanced 1.8% to $4,079.70 per ounce.

Tim Waterer, Chief Market Analyst at KCM Trade, noted, “Gold is catching a solid bid from traders to kick off the week, with the precious metal rising on anticipation that a rate cut could still arrive next month, even though the Fed has been downplaying the chances of it occurring.”

Weak U.S. Economic Data Reinforces Market Optimism for Rate Cut

The latest U.S. data painted a picture of a slowing economy. Job losses in the government and retail sectors dragged down overall employment in October, while companies continued to reduce headcount through cost-cutting measures and automation.

Additionally, U.S. consumer sentiment weakened to its lowest level in nearly three and a half years in early November, reflecting growing public concern over the economic impact of the longest-ever government shutdown. The University of Michigan’s survey last week underscored fears about declining household confidence and higher job insecurity.

The series of weak indicators led markets to price in a 67% probability of a December rate cut, according to the CME FedWatch Tool.

A lower interest rate environment tends to benefit non-yielding assets such as gold, which becomes more attractive as the opportunity cost of holding it decreases.

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Government Shutdown Adds to Economic Uncertainty

Another major factor driving gold’s rally is the ongoing U.S. government shutdown, now entering its 40th day. The prolonged political deadlock has sidelined hundreds of thousands of federal workers, disrupted food aid programs, and snarled air travel across the country.

However, a breakthrough may be near. On Sunday, the U.S. Senate appeared ready to move forward with a measure to reopen the government temporarily and pass funding until January 30. The bill also includes provisions to cover three full-year appropriations packages.

“While it looks like we could be moving towards an end to the shutdown, this also means greater visibility over key economic indicators, which have been short on the ground since the shutdown commenced,” said Waterer.

The resolution of the shutdown could bring clarity to upcoming data releases, helping the Federal Reserve fine-tune its policy stance heading into 2025.

Safe-Haven Demand Strengthens Gold’s Appeal

The combination of geopolitical tension, economic slowdown, and expectations of a rate cut has provided a perfect backdrop for gold’s resurgence. Investors have steadily increased exposure to the yellow metal as a hedge against both inflation and volatility in the global equity markets.

Data from SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), showed that its holdings rose 0.16% to 1,042.06 metric tons on Friday, up from 1,040.35 tons the previous day. This marks the second consecutive weekly increase in holdings, signaling strengthening institutional confidence in gold’s outlook.

Analysts believe that if the Fed signals an accommodative stance in December, gold could extend its rally beyond $4,100 per ounce.

“Gold remains well-positioned to test new highs if the rate cut materializes and economic momentum continues to soften,” noted a commodities strategist at a leading brokerage firm.

Broader Precious Metals Market Also Rallies

The bullish momentum wasn’t limited to gold. Other precious metals also registered strong gains on Monday:

• Spot silver jumped 2.5% to $49.52 per ounce, supported by improving industrial demand and a weaker dollar.

• Platinum rose 1.3% to $1,565.22 per ounce, driven by renewed optimism in the automotive sector.

• Palladium added 1.1% to $1,396.37 per ounce, extending its weekly advance amid tighter supply concerns.

The overall uptrend across the precious metals complex reflects broad-based investor appetite for safe-haven and tangible assets, particularly in a climate of heightened economic uncertainty.

Outlook: Gold May Stay in the Driver’s Seat

With global investors increasingly positioning for a Fed rate cut, and risk appetite dampened by soft U.S. data and political uncertainty, gold prices are expected to remain well-supported in the near term.

However, analysts caution that any hawkish commentary from the Federal Reserve or signs of a stronger U.S. dollar could limit further upside. Still, as long as slowdown concerns persist, gold’s role as a hedge remains intact.

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