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Gold prices extended gains on Tuesday to their highest in nearly three weeks, supported by expectations a potential US government reopening could restart the flow of US economic data ahead of an expected Federal Reserve rate cut next month.
Spot gold was up 0.5 per cent at $4,137.06 per ounce as of 0816 GMT, having earlier hit its highest since October 23 at $4,148.75, still below its record peak of $4,381.21 hit on October 20.
US gold futures for December delivery rose 0.5 per cent to $4,143.80 per ounce.
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Gold is gaining traction because of “a renewed focus on US fiscal concerns, as a government reopening would enable fresh spending financed through additional borrowing”, said Ole Hansen, head of commodity strategy at Saxo Bank.
The US Senate on Monday passed a compromise measure that would end the longest government shutdown in US history, which had delayed critical economic data releases, including the key non-farm payrolls report.
It next heads to the Republican-controlled House of Representatives, where Speaker Mike Johnson has said he would like to pass it as soon as Wednesday.
“A reopening would also restart the economic data flow, potentially firming expectations for a December rate cut,” Hansen said.
US Federal Reserve policymakers remain divided on the path of monetary policy, complicating Chair Jerome Powell’s efforts to navigate differing views following two rate cuts earlier this year.
Fed Governor Stephen Miran on Monday suggested that a 50 basis-point cut might be appropriate for December.
Meanwhile data last week highlighted economic stress, with the US shedding jobs in October and consumer sentiment declining to a 3-1/2-year low as of early November.
Traders are pricing in a 64 per cent probability of a quarter-point rate cut next month.
Julius Baer analyst Carsten Menke reiterated a constructive outlook for both gold and silver, adding that “the fear of missing out still seems present” amid a favorable fundamental backdrop for the metals.
Non-yielding gold typically performs well in low interest-rate environments and during periods of economic uncertainty.
