Gold prices above $4,100 as investors eye Fed rate cuts

Gold prices hovered above the $4,100 mark on Wednesday morning as investors awaited a vote in the US House of Representatives on a deal to reopen the federal government, a move that could restore the flow of economic data and provide clearer guidance on the Federal Reserve’s next steps with interest rates.

Gold futures gained 0.5% to $4,134.30 per ounce, while spot gold edged down 0.1% to $4,132.08 an ounce at the time of writing.

“Everyone is awaiting more clarity on the government shutdown and when the data is coming out of the US again,” said Giovanni Staunovo, an analyst at UBS. “It’s probably some stability before prices keep going up … we are still in an uptrend when it comes to the gold prices. Nothing from the structural side has completely changed.”

Market expectations of US monetary easing have firmed, with CME Group’s FedWatch tool showing a 67% probability of a 25 basis-point rate cut at the Fed’s next meeting on 10 December, up from 62% a day earlier.

Read more: FTSE 100 LIVE: London climbs to fresh high on hopes of US government shutdown ending

“Gold’s prices have broken above the $4,050 resistance level after a consolidation. This confirms a continuation of the prevailing bullish momentum,” analysts at ANZ said in a note. “Yet, the next resistance zone is $4,160–$4,170/oz, breach of this range will push prices towards the record high of $4,380/oz.”

JP Morgan said in a separate report that it expects “central banks and consumers to emerge as reliable buyers during price dips” and forecast gold prices to exceed $5,000 by the fourth quarter of 2026.

“The dip in dollar has suited gold and silver, which have both been posting gains this week,” KCM Trade chief market analyst Tim Waterer said.

“It appears that ‘normal service has resumed’ for gold, with the precious metal trading back above $4,100 while eyeing targets further north should US macro data continue to be supportive for additional monetary policy easing.”

Oil prices retreated on Wednesday morning, though expectations that an end to the longest-ever US government shutdown could bolster demand in the world’s largest crude-consuming nation helped limit losses.

Brent crude futures fell 0.5% to $64.83 per barrel at the time of writing, while West Texas Intermediate futures dropped 0.6% to $60.69 a barrel.

The US Republican-controlled House of Representatives is set to vote on Wednesday afternoon on a bill, already approved by the Senate, that would restore funding to government agencies until 30 January.

A reopening of the government would boost consumer confidence and economic activity, spurring demand for crude oil, IG market analyst Tony Sycamore wrote in a note.

Read more: Should you invest in gold?

Meanwhile, the International Energy Agency said in its annual World Energy Outlook that oil and gas demand could continue to grow until 2050. The forecast marks a shift from the IEA’s previous expectation that global oil demand would peak this decade, as the agency reverted to a methodology based on existing policies rather than climate pledges.

“We are not sure the IEA’s change of heart in longer-term predictions means very much in the here and now,” said John Evans, an analyst at PVM Oil Associates.

The pound weakened against major peers in early European trading on Wednesday as investors anticipated that the Bank of England will cut interest rates in December.

Sterling was 0.2% lower against the dollar at $1.3125 and down by the same margin versus the euro at €1.1330.

Traders expect the BoE to reduce interest rates by a further 20 basis points this year, according to Reuters. Market participants have increased dovish bets following the release of UK labour market data for the three months ending in September.

Contrary to the growing expectations of monetary easing, BoE rate setter Megan Greene said at a UBS conference in London on Tuesday that the central bank should continue holding interest rates at current levels.

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She expressed confidence that job conditions and wage growth will begin to improve. “I am worried about inflation persistence in the UK, which means monetary policy needs to be more restrictive than otherwise,” Greene said, adding that “wage settlements data for next year from surveys is higher than we would like to see.”

The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, was up 0.1% at 99.56.

In equities, the FTSE 100 (^FTSE) climbed to a new high on Wednesday morning, hitting 9,905 points, bringing the 10,000-point mark into sight. For more details on market movements, check our live coverage here.

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