Gold moved higher during Wednesday’s Asian session, supported by growing market concerns over expanding government spending in major developed economies. This was especially evident in Japan, where long term bond yields surged to levels not seen in decades. This shift prompted investors to return to defensive assets amid rising fears of mounting fiscal pressures.
In the United States, the Federal Reserve’s stance remained at the center of market discussions, particularly after mixed signals on whether the central bank will proceed with a rate cut in the December meeting. Signs of weakening in the labor market, alongside anticipation for the release of the October meeting minutes, pushed traders toward a more cautious approach providing additional support for gold relative to higher-risk assets.
The dollar held steady after recent gains, but this did not prevent metals from advancing, especially amid a broad sell off in global equities driven by concerns over inflated valuations in the technology sector. The upcoming earnings release from NVIDIA is expected to play a key role in shaping market direction.
Spot gold rose 0.6% to $4,092.51 per ounce, while December futures gained 0.7% to $4,093.79.
The sharp rise in Japanese government bond yields particularly the 20 and 30 year maturities renewed focus on the strain facing Japan’s fiscal position, especially with discussions of a major spending package worth up to 25 trillion yen. With the 10 year yield reaching its highest level since the 2008 financial crisis, markets are increasingly wary of potential spillover risks to the global financial system, given Japan’s position as one of the world’s largest creditors.
Political tensions between Tokyo and Beijing added to market unease after recent comments triggered a diplomatic dispute over the Taiwan issue. Gold was not the only beneficiary; platinum climbed about 0.9% to $1,547.96 an ounce, while silver jumped 1.3% to $51.38 as demand for safe haven assets strengthened.
U.S. jobless claims continue to reflect softness in the labor market, prompting some traders to increase bets on a potential rate cut next month although the broader market still leans toward a hold. The CME FedWatch tool showed expectations for a December rate cut falling from 62.4% last week to 42.4% currently, as investors await the Fed’s meeting minutes for further clarity.
The lack of official economic data due to the previous government shutdown leaves the Federal Reserve operating with limited visibility heading into the December meeting, increasing the likelihood of a more cautious stance. Typically, steady U.S. interest rates reduce demand for non yielding assets like gold, but current market tensions continue to provide additional support for the metal in the near term.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
