On Thursday, gold touched a three-week high of 4,245 USD per ounce before giving back part of its intraday gains, and is now hovering around 4,200 USD.

The weakening U.S. dollar index drove a sharp rise in gold prices in the morning session, after news that the U.S. government had passed a funding bill valid through January 30, allowing the government to resume operations.

However, during the European trading session, optimism faded, pushing gold back below the 4,200 USD level. Even so, the weak performance on Wall Street suggested fresh concerns in the market, which helped gold recover part of its earlier losses.

U.S. equity indices moved lower, with the Dow Jones Industrial Average pulling back from record highs and falling about 400 points intraday. The tech-heavy Nasdaq Composite was the worst performer, dropping 1.76%, dragged down by weakness in technology stocks and mounting worries over stretched valuations.

In addition, market participants are concerned about the imminent wave of U.S. economic data that will be released after a 43-day “data blackout” period. These data releases could influence the Federal Reserve’s December monetary policy decision.

After the October meeting, Fed Chair Jerome Powell stated that a December rate cut should not be taken for granted, and the probability of a cut in December has since declined. According to the CME FedWatch Tool, the probability of a rate cut in December currently stands at 53.6%, while the probability of leaving rates unchanged is 46.4%.

Market Commentary:

In today’s turbulent global economic environment, gold prices have firmly established themselves above the 4,000 USD level. Even though the United States has ended the longest government shutdown in its history and some of the geopolitical clouds have temporarily parted, investor enthusiasm for gold purchasing remains undiminished.