Gold steadies above $3,850 as US shutdown drags on; ISM Services PMI in focus

LONDON (October 3) Gold (XAU/USD) stabilizes above $3,850 on Friday, maintaining a steady tone through the European session after dipping to an intraday low near $3,838, as the US Dollar (USD) eases following its modest rebound a day earlier. The metal’s steady stance comes after a sharp pullback from record highs during Thursday’s volatile session, as traders booked profits following the recent rally.

The broader outlook for Gold remains tilted to the upside, while pullbacks are likely to attract dip-buying interest, supported by safe-haven demand as the United States (US) government shutdown drags into a third day. Moreover, growing expectations that the Federal Reserve (Fed) will cut interest rates later this month provide an additional tailwind for the metal.

Looking ahead, with the September Nonfarm Payrolls (NFP) report delayed due to the political gridlock in Washington, attention turns to the September ISM Services Purchasing Managers Index (PMI) due later on Friday. Meanwhile, Democratic senator Elizabeth Warren has urged the administration to release the BLS Employment report despite the shutdown, but that seems unlikely to happen.

Market movers: US government shutdown weighs on growth outlook and Fed path

• Speaking on CNBC’s Squawk Box on Thursday, US Treasury Secretary Scott Bessent urged Congress to pass a “clean continuing resolution” to fund the government and cautioned that “shutting down the government and lowering the GDP… could see a hit to the GDP, a hit to growth and a hit to working America.”
• According to a White House memo cited by Politico, the US economy risks losing about $15 billion in GDP each week the government remains closed, while a month-long stalemate could push an additional 43,000 people into unemployment.
• Chicago Fed President Austan Goolsbee told Fox Business on Thursday that if the shutdown halts official data releases, the Fed will “turn to other data sources” to guide its decisions. He added that the Chicago Fed’s real-time indicator points to a steady Unemployment Rate around 4.3% and a generally stable labor market, noting the Fed will “make a decision with the information it has” in the absence of official BLS statistics.
• Dallas Fed President Lorie Logan struck a hawkish note on Thursday, saying the recent rate cut should be viewed as “insurance” and warning the central bank must be “very cautious about rate cuts” given that inflation remains above target.
• The Fed faces a murkier outlook as the shutdown disrupts key data releases. Friday’s Nonfarm Payrolls (NFP) report is unlikely to go ahead and the September Consumer Price Index (CPI), scheduled for October 15, could also be postponed, leaving policymakers with limited guidance ahead of the October 28-29 FOMC meeting.
• The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, eased slightly after rebounding from a one-week low on Thursday and was last seen trading around 97.81, remaining under pressure.

FXStreet