U.S. gold futures for December delivery settled 2.4% lower at $4,094.20.“It’s this idea that we’ll see a lower chance of a Fed rate cut in December that takes the wind out of the sails of the gold and silver markets,” said David Meger, director of metals trading at High Ridge Futures.
Stock markets tumbled as a result of the global sell-off triggered by aggressive signals from the Fed.
The longest U.S. government shutdown, which ended Thursday, left a major data gap, leaving the Fed and traders blindly anticipating next month’s policy meeting. Investors hoped that new data would indicate a slowing economy, giving the Fed room to cut rates in December, boosting the appeal of unyielding gold. These expectations diminished as more Fed policymakers took a cautious stance on further monetary easing.
Market expectations for a 25 basis point rate cut next month fell to nearly 46%, down from 50% earlier this week, CME Group’s FedWatch tool showed.
Non-yielding gold tends to perform well during periods of economic uncertainty and in a low interest rate environment.
“When margin calls and liquidations occur, traders close everything to free up margin… This partly explains why even gold is falling in this risky environment,” Fawad Razaqzada, market analyst at City Index and FOREX.com, said in a note.
Meanwhile, demand for physical gold in major Asian markets was subdued this week.
In other metals, spot silver fell 2.8% to $50.84 an ounce but was on track for a weekly gain, up 5.2% year to date.
Platinum fell 2.1% to $1,547.30 and palladium lost 2.8% to $1,387.25. Both metals have risen so much this week.
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