Gold rose to near the highest level in three weeks in the previous session amid speculation that end of the federal government shutdown will lead to the resumption of U.S. economic data and the likelihood of a Federal Reserve rate cut next month. Interest rate reductions are typically bullish for the precious metal, making it a more attractive alternate investment, though a stronger dollar can put a lid on prices.
December gold futures slipped $5.70 Tuesday to settle at $4,116.30 an ounce on Comex, though the front-month contract gained 2.7% in the first two days of the week. Bullion increased 3.2% last month after surging 10% in September, the most in six months, and adding 5% in August. It’s up 56% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The December contract is currently up $27.50 (+0.67%) an ounce to $4143.80 and the DG spot price is $4139.30.
Job figures from ADP research indicated that the labor market likely slowed in the second half of October. The private research firm began releasing additional data given the lack of U.S. federal employment statistics. The report published Tuesday showed that U.S. companies reduced jobs at a rate of 11,250 a week in the four weeks ended Oct. 25. Last week, outplacement firm Challenger, Gray & Christmas showed that the U.S. lost the largest number of jobs in more than 20 years in October.
The longest U.S. government shutdown in U.S. history could end as soon as Wednesday. The Senate on Tuesday passed a temporary funding measure to keep most of the government open through Jan. 30 and some parts of it until Sept. 30. The House must pass the measure and members are returning to Washington to take it up. It must also be signed by the president.
The uncertainty around the government shutdown, which began Oct. 1, helped buoy gold to record highs. The yellow metal is a traditional hedge against uncertainty.
The weakness in the labor market is increasing investor speculation that the Federal Reserve may go ahead and cut interest rates in December, something that Chair Jerome Powell said last month wasn’t certain. The Fed closely follows jobs and inflation data when setting monetary policy.
The central bank is still widely expected to cut interest rates for a third consecutive time in December. Last month, the Fed reduced interest rates to 3.75% to 4.00%.
More than 65% of the investors tracked by the CME FedWatch Tool are betting that the Fed will reduce rates by another 25 basis points in December. The rest anticipate that the Fed will leave rates unchanged. The cut last month was the second 25-basis point reduction in a row. 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.
Front-month silver futures rallied 0.9% Tuesday to settle at $50.74 an ounce on Comex, and the December contract gained 5.4% so far this week. Silver rose 3.3% in October after adding 15% in September, the biggest monthly rally in two and a half years, and climbing 11% in August. It rose 21% in 2024. The December contract is currently up $1.276 (+2.51%) an ounce to $52.020 and the spot price is $52.19.
Spot palladium increased 2% Tuesday to $1,465.00 an ounce and is up 3.9% so far this week. Palladium rose 14% last month after rising 14% in September and declining 7.8% in August. Palladium dropped 17% last year. The spot price is currently down $10.20 an ounce to $1451.00.
Spot platinum decreased 0.2% Tuesday to $1,593.40 an ounce but gained 3% in the first two days of the week. It advanced 1% in October after gaining 15% in September and rising 5.9% in August. Platinum lost 8.4% in 2024. The current spot price is up $3.00 an ounce to $1594.80.
