(Kitco News) - The gold market is ending the week in a tough spot, as bullish momentum has been met with solid technical selling pressure.
Although gold looks somewhat directionless in the near term as investors react to shifting economic conditions, it is important not to get caught up in the noise. This week, gold was unable to hold gains above $4,200 as markets began to price out a potential Federal Reserve rate cut next month.
The U.S. government ended its 43-day shutdown — the longest in history — but we can expect the effects to be felt for the next few weeks. Some economic data, like October’s CPI numbers, will be lost forever, as that information is collected manually. For economists, this could be a significant issue because economic modeling depends on reliable, consistent data.
Meanwhile, the Federal Reserve is using the shutdown blackout as a reason to keep interest rates unchanged in December. Of course, this fits the adage: “When you don’t know what to do, do nothing.”
Understandably, the Fed’s potential inaction has spooked some investors, prompting them to sell everything — including gold. Although gold is ending the week with a 2% gain, it is still down more than 3% from its highs on Thursday.
Gold’s rally at the start of the week was probably a little overdone, but seeing a 3% drop because the Fed wants to catch its breath seems like an overreaction. This is where it’s important to look at the bigger picture.
Even without October’s economic data, there are clear indications that the U.S. labor market is losing significant momentum. At the same time, inflation, while elevated, is not accelerating. Ultimately, inflation is not high enough to stop the Fed — especially as it continues to face pressure from President Donald Trump — from cutting interest rates.
Even if the central bank skips December’s meeting, rates will be lower in 2026.
One Federal Reserve meeting is not going to impact gold’s long-term fundamental support.
