Gold prices have stabilized after rising sharply in the previous session, thanks to increased confidence that the US Federal Reserve (FED) will cut interest rates next month.
Spot gold was trading around $4,135 an ounce, after rising nearly 2% on Monday. The increase was driven by a statement from Fed Governor Christopher Waller, who called for a rate cut in December as the US labor market was weakening. Gold often benefits from low interest rates because this precious metal does not yield.
The six-week longest in history US government shutdown has delayed the release of much of the key economic data, making comments from central bank officials a rare source of clues for traders to predict the Feds next move.
New York Fed President John Williams also said on Friday he sees room for a short-term rate cut, while the stock market is currently pricing in a nearly 80% chance of the Fed cutting interest rates by 0.25 percentage points at its last meeting of the year.
The market has had some strong fluctuations recently in response to the Feds statements, said Luca Bindelli, chief investment strategist at Lombard Odier & Cie SA. This shows a very high level of market sensitivity to any signal from the Fed.
Traders are currently monitoring the delayed economic data, including retail sales and the Producer Price Index (PPI) for September, due on Tuesday, along with weekly jobless claims on Wednesday.
Any accompanying statements from Fed officials could be final comments before the central bank enters a media "blackout" period starting on November 29.
After retreating from a record high of more than 4,380 USD/ounce in October, gold prices have entered an accumulation phase, as some investors worry that the increase has taken place too quickly. However, the precious metal has continued to increase by nearly 60% since the beginning of the year, heading for the year with its strongest increase since 1979, supported by large purchases from central banks and capital flows into ETFs.
As of 8:45 a.m. in Singapore, spot gold was moving sideways at $4,135.24 an ounce, while the Bloomberg Dollar spot Index was also unchanged. Silver prices fell 0.3%, while platinum and palladium both fell slightly.
