Gold Drops as Dollar Gains, Investors Take Profits After Rally

Core Insights - Gold prices have increased following a five-day rally, reaching new records amid a US government shutdown and expectations of Federal Reserve interest-rate cuts due to weak private payrolls data [1][3]. Group 1: Gold Market Dynamics - Bullion is trading near $3,880 an ounce, approximately $15 below its peak, with the government shutdown potentially causing a blackout in essential economic data needed for Fed rate decisions [2]. - The shutdown has delayed the release of non-farm payroll numbers, which may increase pressure on the dollar and lead traders to bet on two more rate cuts by the Fed this year to support a weakening labor market [3]. - Gold has surged 48% this year, on track for its largest annual gain since 1979, driven by central bank purchases and increased holdings in gold-backed exchange-traded funds (ETFs) as the Fed resumed rate cuts [4]. Group 2: ETF Inflows and Demand - Monthly ETF inflows in September were the largest in three years, with notable purchases from Chinese buyers, indicating a resurgence in demand for gold-backed funds after a period of low interest [5]. Group 3: Regulatory Environment - The US Supreme Court's refusal to allow President Trump to remove Fed Governor Lisa Cook may alleviate concerns regarding Fed independence, potentially impacting demand for safe-haven assets like gold [6]. Group 4: Current Market Performance - Spot gold rose 0.5% to $3,884.75 an ounce, while the Bloomberg Dollar Spot Index weakened by 0.1%. Silver also saw a slight increase after reaching a 14-year high [7].