Background on Key Figures and Context
The recent surge in gold prices, approximately 2% on Wednesday, is closely tied to the anticipated reopening of the US government. This development comes ahead of a vote in the House of Representatives to end the 42-day shutdown, which has negatively impacted the economy and disrupted government data publication.
Impact on Bond Yields and Market Expectations
As the US government shutdown nears its end, yields on 10-year Treasury bonds have dropped by 1%, reaching their lowest level since November 5th. This decline in bond yields has fueled expectations of a potential interest rate cut by the Federal Reserve in December, further boosting gold prices.
Gold and Silver Performance
Spot gold increased by 1.67% to reach $1,415.65 per ounce, while December futures for gold in the US market rose by 2.1% to $1,421.35.60 per ounce.
Spot silver also experienced a rise, climbing 3.96% to $53.26 per ounce.
Market Analyst Perspectives
Bob Haberkorn, a market strategist at RJO Futures, commented on the situation: “There’s a lot of concern right now, especially regarding silver due to its low inventory levels. The recent gold price increase is a result of the silver price drop on Wednesday.”
Labor Market Indicators
On Tuesday, the private sector employment data released by ADP showed that employers were shedding an average of 11,250 jobs per week during the four weeks ending October 25th. This data point highlights ongoing weakness in the labor market.
Market Expectations for Fed Interest Rate Cut
With the US government shutdown coming to an end, market operators now assess a 65% probability of a 25-basis-point interest rate cut during the Federal Reserve’s December meeting.
Key Questions and Answers
- Q: What caused the recent surge in gold prices?
A: The anticipated reopening of the US government and a decline in 10-year Treasury bond yields fueled expectations of a potential interest rate cut by the Federal Reserve, driving up gold prices.
- Q: How has the government shutdown affected the economy?
A: The 42-day shutdown has negatively impacted the economy and disrupted government data publication, leading policymakers and markets to rely on private sector indicators for economic assessments.
- Q: What do recent labor market indicators suggest?
A: According to ADP’s private sector employment data, job cuts have continued at an average rate of 11,250 positions per week, indicating ongoing labor market weakness.
- Q: What is the likelihood of a Fed interest rate cut in December?
A: Market operators now estimate a 65% probability of a 25-basis-point interest rate reduction during the Federal Reserve’s December meeting.
