Spot gold’s near-term direction remains unclear. Fading expectations for a December rate cut are weighing on prices, but concerns over a slowing US economy and the Federal Reserve’s independence are supporting safe-haven demand. The Fed’s eventual policy shift is closely linked to the recent government shutdown episode.

Over the past week, international spot gold has shown a classic pattern of “rising first and then pulling back,” reflecting exceptionally active trading between bulls and bears.

On one hand, growing uncertainty over the US economic outlook and doubts about the Fed’s independence continue to underpin safe-haven demand for gold. On the other hand, as the government reopens, bulls have taken profits. Combined with the Fed’s continued hawkish messaging and a rapid cooling in expectations for policy easing, this has capped the upside momentum in gold prices.

Market expectations for a Fed rate cut in December have cooled sharply over the past week. A month ago, the market was almost certain that rates would be cut in December, assigning roughly a 90% probability. That probability has now fallen below 50%. This shift has been the key driver behind last week’s sharp volatility in gold.

The US Treasury yield curve has been steepening from the bottom, suggesting that investors are reassessing inflation risks and the pace of Fed easing. As a non-yielding asset, international spot gold is therefore under pressure. At the same time, the sharp decline in equities driven by safe-haven flows and margin calls may have further intensified selling pressure in gold.

At present, correlations between international spot gold and the US dollar, Treasury yields and the stock market are all relatively low. This suggests that price action is being driven more by capital flows than by traditional macro factors, which in turn is amplifying short-term volatility.

Market commentary:

On the four-hour chart, gold has staged a modest rebound, while the MACD lines and histogram are narrowing below the zero line. Although the reopening of the US government has provided some support by improving liquidity, the data blackout has made it difficult for policymakers and investors to accurately gauge the state of the economy. Key October data on employment, inflation and GDP are missing, and the November data set is also incomplete. This information asymmetry, paradoxically, has strengthened the safe-haven appeal of international spot gold.