Spot Gold extended gains to a fresh three-week high of $4,227.60/oz. on Thursday, underpinned by expectations of another interest rate cut by the Federal Reserve and concerns that the US government reopening will add to debt.
Yesterday US President Donald Trump signed legislation that is to end a 43-day government shutdown, the longest in US history. The latter has delayed the release of essential macro data, which complicated assessments of the US economy’s state, as investors had to rely on secondary, non-government data prints.
The deal funds federal operations through January 30th, but the US government is estimated to add $1.8 trillion annually to the $38 trillion in total debt.
“Precious metals are rallying alongside equities as traders continue to front run dovishness and the resolution of the U.S. government shutdown will not significantly alter the trajectory, as it is expected to contribute to an increase in debt levels,” Hugo Pascal, precious metals trader at InProved, was quoted as saying by Reuters.
“Physical demand for silver and gold remains robust and recent U.S. economic indicators signal weakening growth, a favorable combination for metals prices.”
Still, a government reopening will provide more clarity on the US economic outlook and the Federal Reserve’s policy trajectory.
Markets are now pricing in about a 54% chance of a 25 basis point Fed rate cut in December, compared to a 66% chance a week earlier.
Spot Gold was last up 0.75% on the day to trade at $4,226.65 per troy ounce.
Strong central bank buying, US tariff policies, potential rate cuts by the Federal Reserve, robust ETF inflows and geopolitical uncertainty have fueled Gold’s rally to a series of record highs this year. Its current all-time high stands at $4,381.21/oz.
Year-to-date, the yellow metal has surged 61.06%.
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