Gold Holds Steady as Markets Weigh Fed Policy Outlook and U.S. Government Shutdown Risks
Originally reported by FXStreet, authored by Anil Panchal
Gold remained stable on Monday, November 11, 2024, as financial markets navigated the tug-of-war between investor anticipation of future Federal Reserve interest rate cuts and the easing of concerns about a potential U.S. government shutdown. The yellow metal hovered near the $1,940 mark per ounce, sustaining gains seen in recent weeks, as macroeconomic and geopolitical factors continued to shape market sentiment.
As of late Monday, spot gold edged lower slightly but stayed firm around $1,939 per ounce, after hitting a weekly high of $1,945. Meanwhile, gold futures for December delivery also hit near $1,942, signaling relative market confidence stemming from safe-haven assets amid mixed economic signals and policy speculation.
Key Forces Influencing Gold Prices
Gold’s recent steadiness comes as investors attempt to forecast the Federal Reserve’s next move. In the wake of a softer-than-expected U.S. jobs report, market players increased bets that the Fed might soon pivot toward rate cuts. However, recent comments from Fed officials tempered those assumptions, a dynamic that has kept gold range-bound.
The following factors are shaping the pricing environment for the precious metal:
■ Federal Reserve Interest Rate Outlook:
– The latest Nonfarm Payroll (NFP) report showed the U.S. economy added only 150,000 jobs in October, down from 297,000 in September.
– The unemployment rate ticked higher to 3.9%, from the previous 3.8%, and average hourly earnings rose just 0.2% month-on-month, hinting at a cooling labor market.
– These signs of slowing economic momentum increased market speculation that the Fed could halt further rate hikes or even begin cutting interest rates in 2024.
– However, several Fed officials, including Minneapolis Fed President Neel Kashkari and Boston Fed President Susan Collins, highlighted a cautious stance. Kashkari emphasized that inflation, while eased, still poses a concern, making a rate pause more likely but cuts not guaranteed.
■ U.S. Government Shutdown Prospects:
– As the November 17 deadline for funding the government loomed, concerns about a potential shutdown resurfaced last week. However, bipartisan moves over the weekend to resolve the fiscal impasse helped ease investor anxiety.
– House Speaker Mike Johnson proposed a temporary funding bill that could avert a shutdown by extending government operations through early 2025. The proposal has gathered support from both sides, boosting market confidence and dampening the safe-haven demand spike often associated with political uncertainty.
■ Geopolitical Unrest:
– Ongoing conflicts in the Middle East, particularly the Israel-Hamas war, kept geopolitical risk premiums on the table, supporting safe-haven flows into gold.
– Rising oil prices stemming from the unrest and attacks on maritime trade in the Red Sea added to inflation concerns globally, prompting investors to hedge risks via precious metals.
■ US Dollar and Treasury Yields:
– The U.S. Dollar Index (DXY) showed modest weakness, hovering close to three-month lows, as traders factored in a less hawkish Fed.
– A weaker dollar makes gold cheaper for holders of other currencies, generally lifting demand.
– Additionally, U.S. Treasury yields fell, with the 10-year note slipping below 4.60% as investors adjusted expectations for monetary policy. Since gold is a non-yielding asset, lower interest rates tend to enhance its appeal.
Short-Term Gold Market Analysis
Despite the general resilience in gold prices, the metal faces short-term resistance and support levels that may determine its future trajectory. Technical indicators point to some key thresholds to monitor in the coming sessions.
■ Resistance Levels:
– $1,945: Recent weekly high and an important psychological barrier.
– $1,965: October peak that could serve as a next resistance if bullish momentum strengthens.
■ Support Levels
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