Gold prices have stabilized after two consecutive sessions of decline, in the context of the growing expectations of the US Federal Reserve (FED) cutting interest rates next month.
The precious metal traded below $4,100/ounce on Monday, after falling more than 2% in the previous session. Expectations for another rate cut have weakened last week as Fed officials have shown little confidence in easing borrowing costs soon. Low interest rates often increase the attractiveness of gold - an asset that does not yield - to investors.
Traders and policymakers are awaiting a series of data delayed by the longest US government shutdown in history. A six-week absence of reliable statistics on the world's largest labor market and inflation has made some officials increasingly cautious about committing to a rate cut next month.
Traders are divided about the possibility of the Fed cutting interest rates in December, after almost completely betting on a 0.25 percentage point cut less than a month ago.
The government has reopened, but the data fog caused by the shutdown is still overshadowing the market the coming weeks will bring numbers we are barely aware of, said Hebe Chen, strategist at Vantage Markets in Melbourne.
Gold has still increased by about 55% since the beginning of the year and is on track for its best annual increase since 1979. The record-breaking rally of $4,380 an ounce last month was driven by strong central bank buying, while investors also looked to the precious metal as a hedge against increased fiscal uncertainty in many major economies.
Despite a slight correction, the medium- and long-term trend of gold is still maintained, supported by expectations of a weak USD and a safe-haven mentality when the short-term and long-term prospects are not clear, Chen said.
Gold prices increased 0.1% to 4,088.16 USD/ounce at 9:4 am in Singapore. The Bloomberg Dollar spot Index also increased by 0.1%. Silver and palladium prices increased, while platinum remained unchanged.
