Gold Rallies as Economic Data Solidifies Fed Rate Cut Possibility

The start of this week saw the price of gold rise by almost 3% to reach $4,111.39 an ounce, after initially reaching the high point it notched in October. The rally follows the release of the latest U.S. economic data that bolstered expectations of an upcoming reduction in rates of interest by the Fed, which drove investor demand for the precious metal. 

In the U.S. futures market, December gold contracts surged to reach $4,122 an ounce, representing a 2.8% increase. 

According to Zaner Metals’ Senior Metals Strategist and VP, Peter Grant, weaker economic indicators have encouraged a more dovish outlook among traders. Recent figures revealed that the U.S. economy lost jobs in October, with notable declines in the retail and government sectors. 

Meanwhile, the CME FedWatch Tool indicates that markets are pricing in a 64% probability of a rate cut next month, with the likelihood increasing to around 77% by January. Gold is known to perform well in times of uncertainty as well as in a low interest rate environment. This is different from the dollar’s performance when interest rates are low, as the greenback normally weakens. 

As a result, investors often rotate into precious metals during periods when the Federal Reserve signals a softer stance. This dynamic has amplified the current rally. 

Given the above expectations, many expect the price of the precious metal to range between $4,200 and $4,300 an ounce by the year’s end. By Q1 of 2026, some expect gold’s price to have reached $5,000 an ounce. 

In other news, the U.S. Senate advanced legislation intended to reopen the federal government this past weekend, marking progress toward ending the 40-day shutdown. According to Ole Hansen, Saxo Bank’s Head of Commodity Strategy, the government’s reopening will not only restore the flow of economic data and renew expectations for a reduction in interest rates next month, but also redirect market attention toward the worsening fiscal situation in America. 

Apart from gold, other precious metals have also recorded significant increases in their prices. For instance, palladium saw its price increase to $1,422.79 an ounce, representing a more than 3% rise. Spot silver has also risen to $50.46 an ounce, which is a 4.5% surge and its strongest level since last month. Additionally, platinum has gained over 2% to reach $1,582.50 per ounce. 

Looking ahead, market watchers warn that while the outlook for gold remains positive, volatility could return if upcoming economic data surprises to the upside. Companies like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) involved in gold extraction will be tracking any changes to the macroeconomic drivers of commodity markets. 

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