(Kitco News) - Gold demonstrated resilience today, closing higher despite trading to both a lower low and lower high during the session.
Prices opened under pressure, reaching an intraday low of $3,997 before staging a recovery. This rebound prevented what would have been the fourth consecutive day of declining prices.
Federal Reserve policy remains key driver
The central question facing gold markets continues to be whether the Federal Reserve will implement a rate cut or maintain current interest rate levels at the upcoming FOMC meeting. With inflation running near 3%—a level typically inconsistent with rate cut considerations—the December meeting presents an unusual scenario. Current probabilities show just under 50% odds of a rate cut, down significantly from a month ago but still indicating an even split among market participants.
Several Federal Reserve officials have recently expressed concerns about the current monetary policy stance, adding to the uncertainty. As a non-yielding asset, gold typically benefits from lower interest rates, making any potential Fed action particularly consequential for precious metals markets.
Employment data supports rate cut narrative
Recent economic data has tilted in gold's favor, though government shutdown delays have limited the flow of information. Today's unemployment claims data revealed Americans receiving benefits reached a two-month high in mid-October, with continued claims rising to 1.9 million for the week ending October 18.
Market participants now await two critical releases: the Fed's minutes from the October 28-29 meeting (tomorrow) and the delayed September employment report from the Labor Department (Thursday).
These reports are expected to provide crucial insight into December rate cut prospects, which many analysts believe explains today's gains in both gold and silver.
Structural demand remains strong
Beyond near-term policy considerations, gold continues to benefit from sustained central bank accumulation. Major central banks worldwide have actively increased gold reserves rather than dollar holdings, providing fundamental support for the bullish bias that has driven recent price advances.
Technical outlook
Looking ahead, the $4,000 level appears positioned to serve as support rather than resistance. Barring significant shifts in the economic landscape, gold should find solid footing at or above this psychological level.
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