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Gold Advances With Weakening US Economy Aiding Haven Demand

(Bloomberg) -- Gold rose for a second day as a weakening US economy outweighed progress on ending the government shutdown in Washington.

Bullion traded near $4,045 an ounce after finishing last week little changed. The precious metal built on gains made on Friday as a measure of US consumer sentiment fell to near the lowest on record, with the shutdown and rising prices souring the outlook.

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The record-breaking impasse in Washington, meanwhile, appears to be nearing an end after a group of moderate Senate Democrats agreed to support a deal to reopen the government, people familiar with the talks said. The suspension of data has meant the Federal Reserve has had to fly blind as it tries to balance high inflation and weak labor market.

“When the shutdown risk fades, investors often turn their attention back to the Federal Reserve’s policy outlook,” said Vasu Menon, an investment strategist at Oversea-Chinese Banking Corp. “If ending the shutdown means the government can release delayed economic data, it gives the Fed room to ease policy sooner if the data shows slowing growth.”

Gold has retreated around 8% since hitting a record high above $4,380 an ounce in mid-October. It’s still up more than half this year, however, and most of the factors that have propelled the blistering rally — heightened economic and geopolitical uncertainties and elevated central bank and retail buying — are still in place.

Spot gold rose 1.1% to $4,045.96 an ounce as of 9:26 a.m. Singapore time. The Bloomberg Dollar Spot Index was steady. Silver, platinum and palladium all advanced.