Gold prices rise on weaker dollar, Fed easing bets; holds long-term appeal

Investing.com-- Gold prices nudged higher Friday, supported by a softer U.S. dollar and growing bets on another Federal Reserve rate cut.

At 08:15 ET (13:15 GMT), Spot gold was up 0.5% at $3,996.56 an ounce and U.S. Gold Futures edged 0.3% higher to $4,003.87 per ounce.

Softer dollar, Fed easing bets support gold prices

The US Dollar Index fell 0.5% on Thursday and stayed subdued on Friday, making bullion cheaper for holders of other currencies.

The prolonged U.S. government shutdown -- which has now entered its second month -- has delayed the release of key economic reports, including employment and inflation data, leaving markets with limited official guidance.

The data vacuum has heightened uncertainty and prompted investors to rely on private-sector surveys for economic signals.

A private jobs report on Thursday showed signs of weakness in the labor market, adding to expectations that the Fed could ease policy rates again sooner than previously thought.

"The absence of official data is clouding the situation, but business surveys suggest the Federal Reserve will likely cut rates further despite recent hawkish messaging," ING analysts said in a note.

Futures pricing now indicates about a 70% chance of a rate cut in December, up from roughly 60% a day ago. Lower interest rates tend to support gold, which yields no interest.

Global equity markets, meanwhile, extended sharp losses this week, with technology shares leading the slide amid renewed concerns over lofty valuations.

The broader rout pushed investors toward safer assets, such as gold and U.S. Treasuries.

Gold has long-term appeal - BCA

Gold has retreated from the all-time highs seen late last month, but BCA Research still sees it delivering strong long-term returns.

After a 10% pullback following this year’s sharp rally, BCA strategists said the correction in gold is “mostly behind us,” while maintaining that its long-term appeal remains intact.

“The network effect that has made gold the physical insurance asset of choice will generate long-term outperformance versus other commodities,” a team led by Dhaval Joshi wrote in a report released Thursday.

Gold’s value, they said, stems from its role as an “insurance asset” in the fiat money system—a function reinforced by collective investor belief and central bank behavior.

“The true value of gold comes from the network effect that makes gold the go-to insurance asset in a fiat monetary regime,” the strategists said.

The research house identified three main drivers of gold’s long-term value: global wealth levels, the share of wealth allocated to insurance assets, and the availability of alternatives.

Metal markets edge higher; Chinese exports fall unexpectedly in Oct

Other precious and industrial metals traded modestly higher on Friday as a weak dollar lent support.

Silver Futures rose 1% to $48.425 per ounce and Platinum Futures advanced 1.6% to $1,562.10/oz.

Benchmark Copper Futures on the London Metal Exchange gained 0.6% to $10,743.20 a ton, while U.S. Copper Futures were up 0.6% to $4.9955 a pound.

Data on Friday showed that Chinese exports unexpectedly shrank in October for the first time in 18 months, amid continued pressure from high U.S. trade tariffs and cooling overseas demand.

Imports also weakened, leading to a decline in the country’s trade balance.

Ayushman Ojha contributed to this article