Gold Falls for Third Day as Expectations Fade for US Rate Cut

(Bloomberg) — Gold fell for a third day, with expectations dwindling that the US Federal Reserve will cut interest rates when a backlog of data reveals a clearer picture of the world’s biggest economy.

Bullion declined as much as 0.8%, having lost more than 2% in the previous session. Traders are losing confidence in a December rate cut as Federal Reserve officials show little conviction for reducing borrowing costs. Lower interest rates typically make non-yielding bullion more appealing to investors.

Most Read from Bloomberg

Before making their next move, investors and policymakers are awaiting a flurry of data held up by the longest US government shutdown in history. A six-week absence of reliable statistics on the American labor market and inflation has made some officials increasingly reluctant to commit to another rate cut next month. Traders are now split on the likelihood of a rate cut in December, after all but pricing in a quarter-point reduction less than a month ago.

“The shutdown is over, but the data fog it created is still clouding markets — the next few weeks will deliver numbers we barely have a handle on,” said Hebe Chen, a strategist at Vantage Markets in Melbourne. “That keeps the Fed’s rate-cut path far from clear.”

In Asia, the recent pullback in gold has been compounded by “subdued” physical demand,” said Manav Modi, an analyst at Motilal Oswal Financial Services Ltd. in Mumbai. Indian dealers are offering steep discounts as recent volatility has deterred buyers, he said.

Gold is still up about 55% this year and remains on target for its best annual performance since 1979. A scorching rally to a record high above $4,380 last month has been underpinned by elevated central-bank purchases, while investors have also piled into precious metals as a hedge against growing fiscal unease in some of the world’s biggest economies.

“Despite a minor pullback, gold’s medium-to-long-term trend remains intact, supported by softening dollar expectations and investors favoring safety as both the near- and long-term outlooks stay blurred,” Chen said.

Gold fell 0.5% to $4,063.21 an ounce as of 2:18 p.m. in Singapore. The Bloomberg Dollar Spot Index was up 0.1%. Silver and palladium rose, while platinum also edged up.

Most Read from Bloomberg Businessweek