Gold Extends Gains as Weak Economic Data Fuels Rate Cut Bets

Gold prices climbed for a second consecutive session on Monday, as a series of signals pointing to a softening U.S. economy bolstered expectations for an imminent interest rate cut from the Federal Reserve. This bullish momentum for the non-yielding asset largely overshadowed positive developments toward ending the protracted U.S. government shutdown.

Market Movement and Data Deluge

Spot gold surged as much as 1.8% to $4,071.55 an ounce, building on gains from the previous Friday. The rally followed the release of a key University of Michigan report showing U.S. consumer sentiment plummeting to near-record lows, exacerbated by the ongoing government shutdown and persistent price pressures. This came on the heels of a private sector payrolls report that signaled unexpected weakness in the labor market.

“The trifecta of weak sentiment, a cooling job market, and the distortive effects of the shutdown is creating a perfect storm for gold,” said Riya Singh, an analyst at Emkay Global Financial Services in Mumbai. “These indicators have firmly reinforced market expectations that the Fed may have no choice but to trim rates as early as next month to stave off a deeper slowdown.”

The Shutdown’s Dual-Edged Sword

The record-breaking political impasse in Washington, which has suspended the release of crucial government economic data, appears to be nearing a resolution. A bipartisan group of Senators has agreed to a framework deal to reopen the government, according to people familiar with the negotiations.

This progress, however, presents a complex dynamic for gold traders. While the resolution of political uncertainty is typically a headwind for safe-haven assets, it also paves the way for a deluge of delayed economic data.

“The end of the shutdown is a double-edged sword for gold,” explained Vasu Menon, an investment strategist at Oversea-Chinese Banking Corp. “When the immediate political risk fades, investors quickly refocus on the Fed’s policy outlook. If the incoming data confirms a significant economic slowdown—which we suspect it will—it gives the Fed the evidence and the room to ease policy sooner rather than later. That is ultimately positive for gold.”

A Structural Bull Market Pauses, Not Breaks

Despite the recent rally, gold remains approximately 7% below its mid-October record high above $4,380 an ounce. Analysts view this not as a reversal of the long-term trend, but as a healthy consolidation within a powerful bull market.

“The fundamental pillars supporting gold’s blistering rally this year remain firmly intact,” said a note from metals strategists at Metallic Analytics. “We are still looking at a landscape defined by heightened geopolitical tensions, profound economic uncertainties, and structurally strong physical buying from central banks and retail investors alike.”

The People’s Bank of China, a major driver of the bullion market, continued its relentless accumulation strategy, adding to its reserves for a 12th consecutive month in October, according to data released last week. This sustained official sector demand has been complemented by a resurgence in interest from retail investors, with gold-backed exchange-traded funds (ETFs) registering net inflows over the past two trading sessions.

Broader Precious Metals Complex Rallies

The bullish sentiment spilled over into the wider precious metals complex. Silver, often referred to as “poor man’s gold,” outperformed with a jump of 2.4%, while platinum and palladium also posted significant gains. The Bloomberg Dollar Spot Index held steady, removing a potential headwind for dollar-priced commodities and allowing the fundamental story to drive the market.

As traders await the resolution in Washington and the subsequent data dump, the market’s focus remains squarely on the Federal Reserve. The path of interest rates, more than any other factor, will determine whether gold’s recent breakout is the start of a new leg higher in its historic run.

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