Gold continues to shine amid Fed rate cut prospects

Today’s headlines

What’s happening: Gold prices rose sharply on Monday amid persistent demand for safe-haven assets.

What happened: Speculations of further interest rate cuts by the US Federal Reserve also provided a boost to gold prices.

Investors continued to monitor comments related to the US-China relationship, with Treasury Secretary Scott Bessent scheduled to meet with China’s Vice Premier He Lifeng in Malaysia this week.

Why it matters: Gold surged to a record high in early trading on Friday, only to reverse during the session and log its steepest decline since mid-May. Investors moved away from safe-haven assets after remarks from US President Donald Trump eased concerns around the ongoing trade tensions with China.

A focus on the ongoing economic and political concerns in the US lent support to gold prices on Monday.

The US government extended its shutdown for the 20th day on Monday, with senators unable to reach a deal for the tenth time last week. The shutdown has resulted in delays in several major economic reports, leaving investors with no insights into the current state of economy ahead of the Fed’s meeting next week.

White House economic adviser Kevin Hassett said the ongoing shutdown is expected to end “sometime this week.”

Markets widely expect the Federal Reserve to cut its benchmark interest rates next week and to announce another cut in December. Being a non-yielding asset, gold generally sees higher demand in a low-rate environment.

Some strength in the US dollar weighed on gold prices, 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, edged higher to 98.59 on Monday.

Gold for December delivery jumped 3.5% to close at $4,359.40 per ounce on Monday.

In other metals trading, silver rose to $51.384 and platinum to $1,652.2. Palladium settled higher at $1,537.30 and copper climbed to $5.0360.

What to watch: Investors will continue monitoring updates on the US-China talks, after Trump expressed optimism regarding reaching a deal, while describing his earlier threat of higher tariffs as “unsustainable.”

Talks to end the ongoing US government shutdown will also remain in focus.

The markets today

The Australian dollar in focus today ahead of key economic reports this week

Context: The AUD/USD forex pair slipped this morning as investors assessed the progress on a trade deal between Australia and the US.

Details: US President Donald Trump signed an $8.5 billion critical minerals partnership with Australia’s Prime Minister Anthony Albanese. The deal came amid Washington’s efforts to lower the reliance on China, which recently tightened export controls on critical minerals.

Australia’s Prime Minister said the agreement with the US takes the ties between the two countries to the “next level.”

Data released last week showed that the unemployment rate in Australia surged more than expected to 4.5% in September, while employment rose by just 14,900 to 14.64 million, below market estimates of 17,000.

The recent data indicated softness in the labour market, raising speculations of the Reserve Bank of Australia resuming interest rate cuts as early as next month.

Strength in the US dollar weighed on the AUD/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 98.65 this morning.

The AUD/USD forex pair edged lower to 0.6513 this morning, while the S&P/ASX 200 gained around 0.59% to trade at 9,085.10.

What to watch: Data on S&P Global manufacturing PMI, S&P Global services PMI and S&P Global composite PMI will be released on Friday.

The S&P Global manufacturing PMI, which declined to 51.4 in September from 53 in the previous month, is expected to fall further to 51 in October. Analysts expect the S&P Global services PMI business activity index to decline to 51.8 in October from 52.4 in September, while the S&P Global composite PMI is expected to ease to 52 in October from 52.4 in the previous month.

Other Markets: European indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.52%, 1.80%, 0.39% and 1.03%, respectively.

The news shaping the markets

Russian forces announced that they had conducted several attacks on the Kherson region in Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.

Qatar’s annual inflation rate accelerated to 1.15% in September, from 0.73% in the previous month, exerting pressure on the QAR/USD forex pair.

Canada granted tariff relief on some steel and aluminium imports from the US and China to provide support to its domestic industries impacted by trade tensions. This sent the CAD/USD pair lower in forex trading this morning.

Argentina’s trade surplus narrowed to $921 million in September, from $982 million in the year-ago period, which exerted pressure on the ARS/USD forex pair.

Colombia’s leading economic indicator climbed 1.98% year-over-year in August. Although this marked a slowdown from the 4.3% growth recorded in the previous month, the COP/USD pair rose in forex trading this morning.

What else to watch today

UK’s Green Gilt 2053 auction (1300 UAE Time), Germany’s 10-year Bund/g auction (1330 UAE Time) and 5-tear Bobl/g auction (1330 UAE Time), India’s infrastructure output (1530 UAE Time), Canada’s inflation rate (1630 UAE Time) and core inflation rate (1630 UAE Time), as well as US Redbook index (1655 UAE Time) and NY Fed Treasury purchases 1 to 2.5 yrs (1830 UAE Time).