Gold reaches 3-week high on Fed rate cut prospects

Today’s headlines

What’s happening: Gold prices rose sharply this morning, reaching over a three-week high.

What happened: Soft economic reports from the US reinforced speculations of the Federal Reserve cutting interest rates in December.

A bullish forecast for gold by JP Morgan Private Bank provided a further boost to the yellow metal.

Why it matters: Data released last week showed that the US economy lost jobs in October, amid a slowdown in the retail and government sectors.

The University of Michigan’s consumer sentiment index fell to 50.3 in November, from 53.6 in October, missing market expectations of 53.2. Sentiment was impacted by the longest US government shutdown on record and continuous price pressures.

Although the US Senate presented a way to reopen the federal government to end the 40-day shutdown, there is uncertainty around whether this will materialise.

Investors widely expect the Fed to cut interest rates by 25bps in December or January. The non-yielding bullion generally performs well in a low rate and uncertain economic environment.

JP Morgan Private Bank projected gold to top $5,000 per ounce in 2026, with continued buying by central banks in emerging markets.

Strength in the US dollar weighed on gold prices this morning, as a higher greenback makes metals more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.1% to 99.69.

Gold for December delivery jumped 2.8% to close at $4,122.00 per ounce on Monday, with prices rising by 0.5% this morning.

In other metals trading, silver prices jumped 0.3% to trade at $50.47 per ounce this morning, while palladium added 0.3% to reach $1,453.00. Copper fell 0.5% to $5.0830 and platinum slipped 0.1% to $1,599.4.

What to watch: Investors will continue monitoring comments from Fed officials regarding their monetary policy. Progress on ending the federal government shutdown will also remain in focus.

The markets today

The Australian dollar in focus today ahead of some major economic reports

Context: The AUD/USD forex pair slipped this morning as investors digested the latest economic data.

Details: Data released this morning showed Australia’s NAB business confidence index fell to 6 in October, from 7 in September. Business conditions rose slightly, following strength in sales and profitability, while employment levels were unchanged last month.

Australia’s Westpac-Melbourne Institute consumer sentiment index rose 12.8% to 103.8 in November, following a 3.5% decline in the previous month. The index surpassed the 100 level for the first time since February 2022. However, unemployment expectations rose 9.3% to 139.5 during the month.

Strength in the US dollar also weighed on the AUD/USD forex pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained 0.1% to 99.69.

The AUD/USD forex pair slipped around 0.1% to 0.6531 this morning, while the S&P/ASX 200 declined around 0.2% to 8,819.30.

What to watch: Investors await the release of economic data on home loans (0430 UAE Time) and investment lending for homes (0430 UAE Time) from Australia on Wednesday. The value of new owner-occupier loan commitments for dwellings, which grew by 2.4% to A$54.7 billion in the second quarter, is expected to surge by 2.9% in the third quarter. Analysts expect investment lending for homes in Australia to jump by 4% in the third quarter, up from the 1.4% growth recorded in the previous quarter.

Jobs data from Australia, due to be released on Thursday, will also remain in focus. Employment in Australia, which surged by 14,900 to 14.64 million in September, is expected to rise by 15,000 in October. Analysts expect Australia’s unemployment rate to decline to 4.4% in October, from 4.5% in previous month.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.81%, 1.54% and 2.20%, respectively.

The news shaping the markets

Ukraine launched drone and missile attacks, which cut power and heating in two Russian cities near the border. The news sent the RUB/USD pair lower in forex trading this morning.

Indonesia’s new car sales declined 4.4% year-over-year to 74,019 units in October. This following a 15.1% plunge in the previous month exerted pressure on the IDR/USD forex pair.

Ireland’s AIB construction PMI climbed to 48.1 in September, from 45.9 in the previous month. The construction sector remaining in the contraction zone for the sixth consecutive month sent the EUR/USD pair lower in forex trading this morning.

UK’s retail sales grew by 1.5% year-over-year in October, decelerating from the 2% growth recorded in the previous month. This representing the weakest rate in five months exerted pressure on the GBP/USD forex pair.

Japan’s current account surplus jumped to a record high of ¥4,483.3 billion in September, from ¥1,537.4 billion in the year-ago period. However, the JPY/USD pair edged lower in forex trading this morning.

What else to watch today

South Africa’s unemployment rate (1330 UAE Time), unemployed persons (1330 UAE Time), weekly bond auction (1330 UAE Time) and manufacturing production (1500 UAE Time), Spain’s 3-month Letras auction (1340 UAE Time) and 9-month Letras auction (1340 UAE Time), Eurozone’s ZEW economic sentiment index (1400 UAE Time), Germany’s ZEW economic sentiment index (1400 UAE Time) and ZEW current conditions (1400 UAE Time), Brazil Central Bank’s Copom meeting minutes (1500 UAE Time) and inflation rate (1600 UAE Time), US NFIB business optimism index (1500 UAE Time) and ADP employment change weekly (1715 UAE Time), as well as Mexico’s industrial production (1600 UAE Time).