Normal Service Resumes for Gold, full access restored

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KCM Trade | Market Commentary | Tim Waterer | ‘Normal Service Resumes’ for Gold

Justified By Tim Waterer, Chief Market Analyst of KCM Trade & Forbes Advisor Australia Advisory Board Member

An end to the US government shutdown of 2025 is in sight, and with that would come greater visibility over the current state of US economic health. With the Senate having passed an interim funding bill (which would at least keep things operational until the end of January), which now awaits House approval and then the green light from the President, the US government could soon be open for business which means that key macroeconomic data would start to flow again.

The feeling is that when labour market and inflation data becomes readily available once again, that the figures may paint a not-so-pretty picture of economic health – a picture which may persuade the Fed to deliver a further rate cut next month. So essentially, traders are optimistic not only about the shutdown ending but also about the scenario where the resumption of key economic data being released may convince the Fed to cut rates once more this year for good measure.

The Dollar has been reacting to this scenario of a potentially strengthening case for a December rate cut. Consumer sentiment and private payrolls data have been soft and if government data, once it resumes, confirms this trend of economic weakness, the greenback could be facing further pressures. The Dollar Index (DXY) has slipped back below the psychological 100 level this week however the USD’s decline hasn’t been across the board, with the yen still showing weakness on fiscal spending expectations from the new Japanese government.

The USDJPY rate remains elevated near the 154 level, having gained nearly 2% over the past month. However, we could be at or near the top of the current range for USDJPY should the Bank of Japan (BOJ) start to strongly entertain the idea of a possible rate rise next month, which would narrow the US-Japanese bond yield spread.

The dip in form from the Dollar has suited gold and silver, which have both been posting gains this week. It appears that ‘normal service has resumed’ for gold with the precious metal trading back above $4100 while eyeing off targets further north should US macro data continue to be supportive for additional monetary policy easing. Resistance in the $4160-$4175 price band would need to be cleared to open a potential run back towards $4235. Support lies at $4080 and $3790. Silver is also in the spotlight again having reclaimed the $50 level courtesy of the softer Dollar, robust industrial demand, and speculation that supply may be short rather than excessive moving into 2026.

In energy markets, oil received a boost from the potential end to the US government shutdown in addition to uncertainty over the impact from sanctions on Russian oil US crude prices have popped back above $60 per barrel however the arrival next month of additional supply from OPEC+ producers is capping the size of the upside move.

For the rest of the week, attention will be on Congress’s attempts to end the shutdown, with traders readying for the economic data to start flowing again, which would give both the Fed and financial markets a better gauge on whether a rate cut is warranted next month.