Stability in Gold Prices After Record Surge

SadaNews - Gold prices stabilized following a five-day surge that saw consecutive record highs, coinciding with the start of the government shutdown in the United States, while traders increased their bets on interest rate cuts by the Federal Reserve after weak private sector employment data.

Spot contracts for the yellow metal traded near $3,860 per ounce, about $35 lower than its peak reached on Wednesday.

The suspension of government operations threatens to halt the release of vital economic data needed by the Fed to make its monetary policy decisions, leaving economists, traders, and policymakers more reliant on non-government data such as the "ADP" report released on Wednesday, which showed a sharp decline in private sector jobs in September.

Pressure on the Dollar and Expectations of Further Cuts

The release of non-farm payroll data, which was supposed to be published on Friday, is set to be delayed due to the shutdown, which may increase pressure on the dollar.

Traders have added bets that the Fed will cut interest rates two more times this year to support the sluggish labor market. Lower borrowing costs typically support non-yielding gold prices, making it cheaper for buyers around the world when the dollar is weak.

The precious metal has surged by 47% this year, on track for its largest annual gains since 1979. This rise has been supported by central bank purchases and increased holdings in gold-backed exchange-traded funds, as the Fed resumes cutting interest rates.

Gold-backed exchange-traded funds recorded their largest monthly inflows in September in three years, according to data compiled by Bloomberg. Chinese buyers have also intensified their demand for these funds, as the four most popular funds saw positive inflows last month after a period of weak demand.

A Safe Haven Amid Political Concerns

Gold has also attracted demand as a safe haven amid rising concerns regarding Fed independence. The U.S. Supreme Court rejected on Wednesday a request by President Donald Trump to immediately remove Federal Reserve Board member Lisa Cook, as a legal case to retain her position continues, marking a setback to his efforts to exert more control over the central bank.

Spot gold fell by 0.2% to $3,859.22 per ounce at 8:10 a.m. in Singapore, after closing up 0.2% on Wednesday. The Bloomberg dollar index remained stable. Silver dropped after rising to a 14-year high in the previous session. Platinum and palladium prices also declined.