WASHINGTON (dpa-AFX) - Gold prices advanced on Monday as markets digested data indicating a contraction in U.S. manufacturing activity, increasing uncertainty and triggering safe-haven demand.
Front Month Comex Gold for November delivery gained by $18.10 (or 0.45%) to $4,000.30 per troy ounce.
Notably, gold prices fell more than 2% last week, but the precious metal still posted a nearly 4% monthly gain for October.
Front Month Comex Silver for November delivery slipped by 10.60 cents (or 0.22%) to $47.888 per troy ounce.
In the U.S., the federal government shutdown that began on October 1 has hit day number 34.
The stalemate between Republicans and Democrats over federal funding is showing no sign of ending. Of note, the shutdown is now just one day short of the record-setting longest U.S. shutdown in history that happened in 2019.
The closure has deprived investors and the U.S. Federal Reserve of major reports on U.S. inflation and jobs, leaving them to get clues on the economy only via private indicators.
According to S&P Global, the U.S. Manufacturing PMI rose to 52.5 in October, up from 52.0 in September.
On the other hand, the Institute for Supply Management's data released today revealed that its U.S. manufacturing PMI fell to 48.7 in October from 49.1 in Septembers. Economists had expected the index to inch up to 49.5
The unexpected dip by the headline index came amid a downturn by production, as the production index slid to 48.2 in October from 51.0 in September.
Meanwhile, the report said the new orders index crept up to 49.4 in October in 48.9 in September, and the backlog of orders index rose to 47.9 in October from 46.2 in September.
The ISM said the employment index also inched up to 46.0 in October from 45.3 in September, although the reading below 50 still indicates a decrease in employment in the manufacturing sector.
Last week, the U.S. Federal Reserve cut interest rates by 25 basis points to a range of 3.75% - 4.00%; the second reduction this year.
Following the announcement, Fed Chair Jerome Powell warned that markets should not assume another rate cut in December as a foregone conclusion. Expectations of a rate cut turned lukewarm following Powell's comments.
However, CME Group FedWatch Tool is currently indicating that investors are still betting on a 67.3% chance of a 25-basis-point rate by the Fed at its upcoming December 9-10 meeting.
When interest rates are lower, non-yielding commodities like gold perform well.
Today, the U.S. dollar index was last seen hovering around 99.8.
Last week, trade talks between U.S. President Donald Trump and Chinese President Xi Jinping in Busan yielded many significant agreements as both sides agreed to a temporary pause in their long-standing trade friction.
Importantly, China agreed to resume soybean purchase from the U.S. and to lift rare-earth export restrictions, while the U.S. has lowered fentanyl-related tariffs. The overall U.S. tariff on Chinese imports is down down to 47% from the earlier 57%.
These developments capped the safe-haven demand for gold last week.
Last weekend, China's Ministry of Finance announced that starting November 1, it will no longer allow retailers to offset a Value-Added Tax (nearly 13%) when selling gold they bought from the Shanghai Gold Exchange, irrespective of it being sold directly or after processing.
Analysts feel that China's move would boost the country's fiscal income in the short-term but also increase the cost of buying for retail gold sellers and consumers, and could impact gold prices globally.
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