Gold Extends Gains on US Fiscal Concerns, Rate-Cut Expectations
(Bloomberg) -- Gold erased gains as traders weighed the prospect of an imminent end to the US government shutdown and weak jobs data.
The record-setting 42-day closure is on a path to end after the Senate passed a temporary funding measure backed by a group of eight centrist Democrats. Reopening the government now depends on the Republican-controlled House, which plans to return to Washington Wednesday.
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Meanwhile, US companies shed 11,250 jobs per week on average in the four weeks ended Oct. 25, according to data released Tuesday by ADP Research. The figures suggest the labor market slowed in the second half of October. Traders have relied on private data as the government closure has delayed the release of official statistics.
The dollar pushed lower after the readings, which would in theory have boosted bullion as it’s priced in the greenback. But gold erased gains to trade lower by as much as 0.4%.
The decline in gold prices could be stemming from outflows of bullion exchange-traded funds, according to Michael Haigh, head of FIC and Commodity Research at Societe Generale.
“My model tells me that in terms of ETF flows, a 1% move in gold can be explained by 10 tons of flow in ETF,” said Haigh.
Gold prices have pulled back in recent weeks after reaching record highs above $4,380 in October as investors booked profits from a rally that’s seen as too fast, too far. And total gold ETF has recorded three consecutive weeks of net outflows as of Friday after eight straight weeks of net inflows, according to data compiled by Bloomberg.
Still gold remains on track for its best annual performance since 1979. Its ferocious rally — the metal has gained more than 55% this year — is based on several factors, including elevated central-bank buying.
“The medium-term drivers that underpin gold’s constructive bias remain intact,” said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. He added the US Federal Reserve was expected to continue easing policy into 2026, with interest rates likely to trend lower.
Gold was down about 0.1% at $4,113.39 an ounce as of 11:17 a.m. in New York. The Bloomberg Dollar Spot Index was inched lower. Silver was little-changed while platinum and palladium gained.
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