Market News

(Bloomberg) -- Gold steadied as traders assessed dwindling expectations that the US Federal Reserve will cut interest rates until a backlog of data provides a clearer picture of the world’s biggest economy.

Bullion was little changed near $4,080 an ounce, after retreating more than 2% in the previous session. Traders are losing confidence in a December rate cut as Federal Reserve officials show little conviction for reducing borrowing costs. Lower interest rates typically make non-yielding bullion more appealing to investors.

Before making their next move, investors and policymakers are awaiting a flurry of data held up by the longest US government shutdown in history. A six-week absence of reliable statistics on the American labor market and inflation has made some officials increasingly reluctant to commit to further monetary easing before there’s more clarity. Interest rate swaps now imply a likelihood of a rate cut in December of less than 50%, after all but pricing in a quarter-point reduction less than a month ago.

“The shutdown is over, but the data fog it created is still clouding markets — the next few weeks will deliver numbers we barely have a handle on,” said Hebe Chen, a strategist at Vantage Markets in Melbourne. “That keeps the Fed’s rate-cut path far from clear.”

In Asia, the recent pullback in gold has been compounded by “subdued” physical demand, said Manav Modi, an analyst at Motilal Oswal Financial Services Ltd. in Mumbai. Indian dealers are offering steep discounts as recent volatility has deterred buyers, he said.

Gold is still up about 55% this year and remains on target for its best annual performance since 1979. A scorching rally to a record high above $4,380 last month has been underpinned by elevated central-bank purchases, while investors have also piled into precious metals as a hedge against growing fiscal unease in some of the world’s biggest economies.

Meanwhile, China is escalating its confrontation with Japan over Prime Minister Sanae Takaichi’s comments on Taiwan, with state media threatening major countermeasures after Beijing’s travel warnings raised the specter of economic retribution.

Gold traded at $ an ounce as of 10:41 a.m. in London. The Bloomberg Dollar Spot Index was also flat. Silver rose, while palladium and platinum fell.

--With assistance from Jack Ryan.