FX.co ★ Gold Reverses Early Momentum

Gold prices declined on Thursday, nearing $4,160 per ounce, after briefly reaching their highest levels in three weeks. This downturn occurred amidst a broad market sell-off following the U.S. government's reopening. Initially, gold saw a surge due to the anticipation that postponed government data would reveal a weakening labor market, potentially prompting the Federal Reserve to implement rate cuts. However, these expectations diminished as Treasury yields increased, thus raising the opportunity cost of holding gold, which does not yield interest. Recent statements from Federal Reserve officials have suggested that a rate cut in December is not guaranteed, with traders currently estimating a 50% likelihood of a 25 basis point reduction next month. Despite today's fluctuations, gold has risen nearly 5% over the week, although the recent decline seems attributed to profit-taking and an adjustment in policy expectations.