Gold prices rose in Asian trade on Wednesday as heightened concerns over stretched fiscal spending in the developed world, especially Japan, drove increased bids for safe haven assets.
Uncertainty over a December interest rate cut by the U.S. Federal Reserve, amid some signs of labor market weakness and before the release of the Fed’s October meeting minutes, also benefited gold and other havens.
The dollar steadied after recent gains, helping spur some strength in metal markets. Gold was also aided by traders seeking shelter amid a broad sell-down in global stock markets, as investors fretted over bloated technology valuations.
Upcoming earnings from artificial intelligence major NVIDIA Corporation (NASDAQ:NVDA) are set to offer more cues on this trade.
Spot gold rose 0.6% to $4,092.51 an ounce, while gold futures for December rose 0.7% to $4,093.79/oz by 00:54 ET (05:54 GMT).
Gold, haven demand rises on growing fiscal concerns A recent spike in Japanese government bond yields, especially the longer-term notes, sparked heightened concerns over stretched fiscal spending in the country, and the Sanae Takaichi administration’s ability to fund more spending.
Markets were especially rattled by reports that Takaichi was planning to unveil a far larger spending package than initially expected, at about 25 trillion yen ($163 billion).
20 and 30-year Japanese bond yields were seen soaring to multi-decade highs, while the benchmark 10-year yield hit its highest level since the 2008 financial crisis.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Japan is a major global creditor, with instability in its bond market, especially amid waning investor appetite for Japanese bonds, threatening to spill over into international markets.
Japan was also a source of geopolitical uncertainty, as a diplomatic spat with China, over comments made by Takaichi on Taiwan, worsened this week despite Tokyo’s attempts at reconciliation.
Other precious metals also rose sharply on Wednesday. Spot platinum surged 0.9% to $1,547.96/oz, while spot silver jumped 1.3% to $51.3825/oz.
US rate cut bets, Fed minutes in focus Some uncertainty over the Fed’s December meeting also benefited gold, after weekly jobless claims data showed sustained weakness in the labor market.
The labor data saw traders slightly increase their bets on a December rate cut, although markets still remained broadly geared towards a hold. CME Fedwatch showed markets pricing in a 42.4% chance for a 25 basis point cut during the Fed’s December 10-11 meeting, down sharply from a 62.4% chance seen last week.
Focus on Wednesday will be on the minutes of the Fed’s late-October meeting for more cues on monetary policy. Fed members had almost unanimously voted in favor of a 25 bps cut, but were seen growing more divided over a December cut in recent weeks.
A lack of official data, due to a prolonged U.S. government shutdown, leaves the Fed flying blind into the December meeting, making a cautious hold more likely.
