Gold gains 2% on optimism about US government reopening

Gold prices climbed 2% on Wednesday as US Treasury yields slipped ahead of a House vote to reopen the government, a move that could revive economic data releases and bolster expectations for a Federal Reserve rate cut in December.

Spot gold rose 2% to USD 4,208.98 per ounce, its highest level since October 21, as of 1:46 p.m. ET (1846 GMT).

US gold futures for December delivery settled 2.4% higher at USD 4,213.60 per ounce.

Benchmark US 10-year yields fell 1% to their lowest level since November 5.

“The government is opening up in the US and the market is anticipating economic data releases, which in all likelihood will show that the American economy has weakened,” said Bart Melek, head of commodity strategies at TD Securities, adding that traders might be increasing longs and covering some short positions.

The Republican-controlled House of Representatives is due to vote later in the day on a deal to end the longest government shutdown in US history.

The 42-day shutdown has weighed on the economy and halted government data, prompting policymakers and markets to rely on private indicators to gauge the state of the economy.

Spot silver gained 4.6% to USD 53.58 per ounce, its highest level since October 17.

“There’s a lot of concern right now, especially in silver, that supplies are very low. What you’re seeing right now in gold is a spillover from silver this morning,” said RJO Futures market strategist Bob Haberkorn.

Meanwhile, Tuesday’s weekly jobs data from ADP showed private employers shed an average of 11,250 jobs a week in the four weeks ending October 25, signaling continued weakness in the labor market.

Traders now see a 65% probability of a 25-basis-point rate cut at the Fed’s meeting in December, according to CME Group’s FedWatch tool.

Non-yielding gold tends to do well in low-interest-rate environments and during times of economic uncertainty.

Elsewhere, platinum rose 2% to USD 1,616.80 and palladium was up 2.5% to USD 1,480.58.

(Reporting by Noel John in Bengaluru; Editing by Leroy Leo, Ed Osmond, and Alan Barona)