Gold Sideways, Silver Down as U.S. Government Shutdown Enters Month Two

 

Gold and Silver Down as U.S. Government Shutdown Enters Month Two

(Bullion News Network) – Gold prices moved sideways on Monday, gaining less than $1 per troy ounce on Monday and remaining above $4,000/ozt. The spot price of silver retreated by over 1%, dropping more than $0.50/ozt to creep toward the $48 support. The price action favored gold, driving the gold-silver ratio one point higher to over 83:1. Traders continued to eye the ongoing U.S. government shutdown, which may threaten the upcoming U.S. employment report scheduled for release on Friday. This report, if released, could be pivotal as investors place their bets on how the Federal Reserve will vote at its December 10th meeting.

The U.S. government entered the second month of its shutdown on Monday. Although a court ruling led to the Trump administration agreeing to partially pay for SNAP benefits in the month of November, experts say the shutdown may end up being the longest in American history. If the shutdown persists until Friday, November 7th, the scheduled U.S. employment report may be delayed or canceled. While the Federal Reserve was able to approximate employment numbers using a combination of internal data and private sector reports prior to its October meeting, a substantive lack of data heading into December could complicate market faith in the FOMC’s rate cut decision. 

Rate cut speculation has returned as a major market driver for safe haven assets, including gold and silver. Precious metals tend to thrive when rates are coming down, but traders are divided on whether or not the Fed will vote for a third consecutive interest rate when it meets again in early December. CME FedWatch currently projects a 67.3% probability that the FOMC will cut rates by 25 basis points; this projection is up from 64% last Friday but down substantially from the October 27th projection of 94.4%. 

At the post-meeting Federal Reserve press conference last Wednesday, Fed Chair Jerome Powell told reporters that the FOMC is still very much undecided on whether to cut interest rates in December. 

And that’s what leads me to say that — that we haven’t made a decision about December. I always say that, it’s a fact that we don’t make decisions in advance. But this is — I’m saying something in addition here, is that it’s not — it’s not to be seen as a foregone conclusion, in fact, far from it.

December rate cut probabilities fell substantially during Powell’s press conference, and precious metals also responded negatively. Markets had previously anticipated a total interest rate cut of 75 basis points during the Fed’s last three meetings. Moving forward into November, the probability that the Fed chooses to further cut rates in December will likely hinge on a combination of inflation and employment data. The first rate cut of 2025 occurred in September after a series of troubling employment reports. A strong uptick in inflation could cause the Fed to act more cautiously and avoid a third rate cut in December, while another cooling labor report may justify cutting rates once again on December 10th.

Additionally, the government shutdown may complicate the FOMC’s decision-making process. This is likely to be the case if the shutdown continues for long enough to disrupt key economic activity reports, including the October U.S. employment report scheduled for November 7th and the October Consumer Price Index slated for release next Wednesday, November 12th. When asked how further data disruptions due to the government shutdown may impact the FOMC’s ability to make a reliable call on interest rates, Chair Powell had this to say:

I would say we’re not going to be able to have the detailed feel of things, but I think if there were significant or material change in the economy one way or another, I think we’d pick that up through this. So, in terms of how it might affect December, it’s really hard to say. […] If there is a very high level of uncertainty, then that could be an argument in favor of caution about moving. But we’ll have to see how it unfolds. 

As Powell said, traders will be looking closely to see how things unfold this month.

Gold ended Monday up less than $1 per troy ounce. Silver prices dropped by more than $0.50/ozt. The price action favored gold, driving the gold-silver ratio more than a point higher to 83.10:1. Platinum prices pulled back by more than $8/ozt. Palladium gained over $10 per troy ounce, which drove the platinum-palladium gap lower.