Gold Prices Are Rising: Changes in the U.S. Economy

The Weakening of the US Economy Drives Up Gold Prices

Gold has gained value alongside the weakening of the US economy and progress towards the reopening of the government in Washington. Spot gold is trading near the level of $4,050 per ounce.

The Impact of Government Shutdown

After a week of sideways movement, gold rose on Friday with the momentum that was generated. Consumer confidence in the US has fallen to historic lows due to the government shutdown and rising prices, further weakening the economic outlook.

Compromise on Temporary Budget

In the US Senate, a compromise was reached between Democrats and Republicans on a temporary budget after the government was closed for 40 days. Some moderate Democrats have stated that they will vote 'yes' on the budget. The vote is expected to lead to the approval of a temporary budget that will fund the government until the end of January.

Investor Expectations and Gold Rally

Vasu Menon, the investment strategist at Oversea-Chinese Banking Corp., stated, "If the risk of government shutdown is lifted, investors typically refocus on the Fed's policy outlook. The end of the shutdown allows for the release of delayed economic data."

The Role of the People's Bank of China

Gold has retreated by about 8% since hitting a record above $4,380 in mid-October. However, gold prices have risen by more than 50% over the course of the year. Economic and geopolitical uncertainties, along with ongoing purchases by central banks and individual investors, continue to support the rally.

The People's Bank of China extended its purchases into the 12th month by adding gold to its reserves in October. There have also been net inflows into gold-backed exchange-traded funds in the last two sessions.

Market Status

As of 11:20 AM TRT, spot gold has risen by 1.2%, reaching $4,048.69 per ounce. The Bloomberg Dollar Index also recorded an increase of 0.1%. Additionally, increases were observed in the prices of silver, platinum, and palladium.