Gold is trading at a gain of more than 1% in mid-European trading today, Monday, October 6, the opening session of the week, hitting a new record high of $3,940 per ounce. This is supported by rising expectations of a US interest rate cut and increased demand for safe havens as the US government shutdown continues. Gold’s gains exceed 50% since the beginning of the year, with the yellow metal trading up about 1.40% at $3,941 per ounce, while silver is trading at $48.51 per ounce, up 1.12%, approaching its all-time high of $49.75 set in April 2011.
The yellow metal, the world’s leading safe-haven asset, is benefiting from political uncertainty and the ongoing US government shutdown since last Wednesday. This has delayed economic data, most notably September employment figures, which were scheduled for release on Friday. Negotiations between Democrats and Republicans to end the partial shutdown have yielded no results, according to a White House official, amid anticipation of mass layoffs of federal employees.
On a related note, official demand and holdings of gold exchange-traded funds (ETFs) are a major factor in gold’s rise, as they continue to grow as a hedge amid escalating tensions. Total investor holdings of gold-denominated ETFs have reached their highest level in three years.
In addition to geopolitical tensions, gold is receiving support from rising expectations that the US Federal Reserve will cut interest rates in October and December. Markets are pricing in a 94% and 85% chance of a 25 basis point rate cut in October and December, respectively, according to the CME’s FedWatch tool. This is an increase of more than 15% compared to last week’s expectations. Platinum, in turn, is trading at $1,609, up 0.25%, while palladium is up about 0.64%, trading at $1,269.