Geopolitical risks, fiscal uncertainties and threats to Federal Reserve independence could spur the yellow metal to new record highs above $4,000 in the near term, HSBC forecast. Uncertainty surrounding the U.S. government shutdown has also contributed to gold’s recent rally, as the precious metal has become a more attractive asset for haven investors. Gold clinched its seventh consecutive weekly gain last week.
December gold futures rose 2.6% last week to settle at $3,908.90 an ounce on Comex, after the front-month contract gained 1.1% Friday. Bullion surged 10% in September, the most in six months, after adding 5% in August and gaining 1.2% in July. It’s up 48% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently up $49.50 (+1.27%) an ounce to $3958.40 and the spot price is $3929.00.
The U.S. government shutdown entered its sixth day and showed no signs of ending, after President Donald Trump told CNN over the weekend that Republicans are “winning” the standoff.
Investors are trying to get a handle on the state of the economy even as the shutdown suspended the release of key economic indicators in the lead-up to the Fed’s next scheduled policy meeting Oct. 28-29.
The monthly jobs report for September, for example, which should have come out last Friday, was delayed indefinitely. Fed officials have said that a weak labor market drove last month’s interest rate cut – the first in nine months – so further signs of weakness in the labor market could have bolstered already widely anticipated chances of another rate cut this month and beyond. Lower interest rates are typically bullish for the yellow metal.
ADP did, however, release its private payrolls report for September last week, showing they fell 32,000, their biggest monthly decline in 2.5 years.
The Fed lowered interest rates by 25 basis points in September to 4.00% to 4.25%. Almost 95% of the investors tracked by the CME FedWatch Tool are betting that the Fed will reduce rates by 25 basis points in October, with the rest expecting the central bank to hold rates unchanged. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts last year.
The Fed’s favorite inflation report, the personal consumption expenditures price index, came out last week, before the shutdown, and showed that so-called core inflation – which excludes volatile food and energy prices, held at 2.9% year on year in August, while the figure was also unchanged at 0.2% month on month. The Fed has said it’s balancing inflation, which is above the central bank’s target, with a worsening job market as it sets monetary policy.
Also driving uncertainty was the situation in the Middle East. Trump had set a Sunday deadline for Hamas to accept the terms of the peace deal he proposed. The organization said days ago that it will release Israeli hostages but wants some changes to the agreement.
Front-month silver futures gained 2.8% last week to settle at $47.97 an ounce on Comex after the December contract increased 3.4% Friday. Silver rose 15% last month, the biggest monthly rally in two and a half years, after climbing 11% in August and gaining 1.5% in July. It rose 21% in 2024. The December contract is currently up $0.225 (+0.47%) an ounce to $48.190 and the spot price is $48.55.
Spot palladium lost 1.6% last week to $1,268.00 an ounce but increased 1.6% Friday. Palladium rose 14% in September after declining 7.8% in August and climbing 8.8% in July. Palladium dropped 17% last year. Currently, the spot price is up $36.00 an ounce to $1309.00.
Spot platinum rose 2.3% last week to $1,614.10 an ounce after advancing 3.1% Friday. It increased 15% in September after rising 5.9% in August and dropping 3.9% in July. Platinum lost 8.4% in 2024. The spot price is currently up $29.40 an ounce to $1646.50.
