Spot Gold Surges on US Debt Fears, Fed Rate Cut Expectations

Overview of the Spot Gold Price Surge

Spot gold prices surged on Thursday, with intraday gains exceeding 1%, nearing $4240 per ounce, the highest level since October 21. This increase is attributed to market expectations that the US government's restart will increase debt levels, coupled with delayed economic data that could support a Federal Reserve rate cut next month.

Analyst Predictions and the Impact of Monetary Policies

Hugo Pascal, a precious metals trader at InProved, noted that precious metals are rising in tandem with stock markets as traders bet on a dovish stance from the Federal Reserve. He added that resolving the US government shutdown will not significantly alter this trajectory, as it is expected to lead to an increase in debt levels.

Factors Supporting Gold Prices

Pascal emphasized that physical demand for silver and gold remains strong, and recent US economic indicators show a slowdown in growth, which presents a favorable combination for metal prices.

Technical Analysis of Gold Prices

Joseph Chai, an analyst at RHB Retail Research, pointed out in a research report that the upward momentum of Comex gold futures is increasing. He explained that the positive price movement on Wednesday's daily chart solidified the position of gold futures prices above the 20-day simple moving average.

Future Gold Price Expectations

Chai stated that gold futures prices broke through the resistance level of $4200 per ounce, also weakening the bearish engulfing pattern formed on October 21. He added that this price movement indicates that gold bulls remain dominant, and the market believes the consolidation phase is over, with the next target for gold being testing the $4400 per ounce level.

Impact of the US Government Shutdown

US President Trump signed legislation to end the 43-day government shutdown, the longest in US history, leading to delays in the release of key economic data such as employment and inflation reports.

Repercussions of the Government Agreement

The agreement provides funding for federal government operations until January 30, 2026, but the government is expected to add an additional $1.8 trillion annually to its $38 trillion debt burden.

Interest Rate Expectations

Despite Federal Reserve Chairman Jerome Powell warning that a December rate cut is not a foregone conclusion, a Reuters poll found that 80% of economists expect the Federal Reserve to cut interest rates by 25 basis points next month.

Impact of Delayed Economic Data

Part of the uncertainty surrounding the Federal Reserve's interest rate outlook stems from a lack of data. Economists say that the US Department of Labor should prioritize processing November's employment and inflation data to ensure that Federal Reserve officials have the latest information at the December policy meeting.

Gold Performance Over the Year

Spot gold has risen more than 60% year-to-date, reaching an all-time high of $4381.21 on October 20, driven by economic and geopolitical concerns, increased inflows into ETFs, and expectations of further rate cuts by the Federal Reserve.

World Gold Council Predictions

The World Gold Council believes that the direction of gold prices in 2026 will depend on the progress made on US trade tariffs and the Federal Reserve's interest rate policies.

Impact of Trade Disputes

Shaokai Fan, Head of the World Gold Council for Asia Pacific (excluding China) and Head of Global Central Bank Affairs, noted that if tariff disputes between the US and its trading partners are resolved smoothly, gold prices are expected to enter a stable range.

Impact of Interest Rates

In addition to tariffs, Shaokai Fan emphasized that next year's gold price volatility will also be affected by the Federal Reserve's interest rate decisions. The market currently expects a 67% probability of a rate cut by the Federal Reserve in December. He added that any adjustment in interest rates is likely to have a positive impact on gold prices.

Investor Preferences

Shaokai Fan pointed out that the World Gold Council has not provided specific forecasts regarding the forms of gold investment that will prevail in the future, and investor preferences vary significantly. He explained that financially savvy investors tend to choose convenient products such as gold ETFs, while others prefer direct ownership of physical gold.