Gold shed gains as traders weighed the prospect of an end to the US government shutdown and weak jobs data.
The record-breaking 42-day government shutdown is set to end soon after the Senate passed a stopgap funding measure supported by eight centrist Democrats. The reopening of the government now hinges on the Republican-controlled House of Representatives, which plans to return to Washington on Wednesday.
Meanwhile, US companies lost an average of 11,250 jobs per week in the four weeks ending October 25, according to data released Tuesday by ADP Research. The figures suggest the labor market slowed in the second half of October. Traders were relying on private data as the government shutdown delayed the release of official statistics.
The dollar weakened after the reading, which would theoretically boost bullion prices since it is priced in US dollars. However, gold erased gains and traded down by up to 0.4%.
The decline in gold prices is likely due to outflows from bullion exchange-traded funds (ETFs), according to Michael Haigh, head of FIC and Commodity Research at Societe Generale.
"My model suggests that in terms of ETF flows, a 1% move in gold can be explained by a 10-ton ETF outflow," Haigh said.
Gold prices have weakened in recent weeks after hitting a record high above $4,380 in October as investors booked profits from a rally deemed too fast and too far. Total gold ETFs have recorded net outflows for three consecutive weeks through Friday after eight consecutive weeks of net inflows, according to data compiled by Bloomberg.
However, gold remains on track for its best annual performance since 1979. The powerful rally—the precious metal has risen more than 55% this year—is based on several factors, including increased buying by central banks.
"The medium-term drivers underpinning gold's constructive bias remain intact," said Christopher Wong, a strategist at Oversea-Chinese Banking Corp. He added that the US Federal Reserve is expected to continue easing policy through 2026, with interest rates likely to fall.
Gold fell about 0.1% to $4,113.39 an ounce at 11:17 a.m. in New York. The Bloomberg Dollar Spot Index weakened slightly. Silver was little changed, while platinum and palladium gained. (alg)
Source: Bloomberg
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