Gold prices are rising. Will the Fed lower interest rates?

Gold prices are rising as a weakening U.S. economy increases the likelihood of the Fed cutting interest rates next month. That factor outweighs assessments of progress toward ending the U.S. government shutdown, dealers said.

Gold rose by almost 2% on Monday. and exceeded the level of USD 4,070 per ounce after ending last week without any major changes.

Investors hope that weaker data from the US economy may support a reduction in interest rates in December by the US Federal Reserve, which will be beneficial for the valuation of precious metals.

For now, the Fed may be groping in the dark as it suspends the publication of many macro indicators in an attempt to offset the weak labor market situation and high inflation.

“Weaker signals from the US labor market have strengthened investors' expectations that the Fed may cut interest rates next month,” says Riya Singh, an analyst at Emkay Global Financial Services.

Meanwhile, a record-long U.S. government shutdown impasse appears nearing an end after a group of Democratic senators agreed to a compromise on funding for federal agencies through January.

“However, optimism related to a possible resolution of the prolonged US government shutdown may dampen the upward momentum in gold prices,” Singh points out.

Since reaching a record high of above USD 4,380 per ounce in mid-October, the price of gold has fallen by approximately 7%.

In 2025, the price of this precious metal is still more than half as high as in 2024. (PAP Biznes)

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