US political uncertainty fuels gold surge, oil prices drop

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Global Markets React to US Political Uncertainty and Shifting Economic Outlook

Global financial markets experienced significant shifts this past week, with currency valuations undergoing a notable rebound after a period of dollar depreciation. This movement underscores the sensitivity of major economies to developments in the United States, particularly concerning fiscal policy and geopolitical stability. Investors are closely monitoring indications from the Federal Reserve regarding future monetary policy, as signals of potential rate cuts continue to influence asset classes ranging from precious metals to energy commodities.

The US dollar faced headwinds, registering a weekly decline against a basket of major currencies. This depreciation was partly attributed to ongoing concerns surrounding a potential government shutdown in Washington, which injected an element of uncertainty into the market. The dollar index, a key barometer of its strength, saw its worst performance since July, reflecting a broader cautious sentiment among traders. This uncertainty was amplified by the absence of the official non-farm payrolls report, a critical economic indicator. Market participants are factoring in the possibility of two additional interest rate reductions by the Federal Reserve within the current year, a prospect that continues to shape trading strategies.

Amidst these currency fluctuations, the euro demonstrated resilience, posting a modest gain against the dollar, while the British pound also advanced. Similarly, the Japanese yen experienced a significant weekly appreciation. The anticipation of further monetary easing from the Federal Reserve, coupled with geopolitical risks, has bolstered demand for safe-haven assets.

Gold Surges to New Heights Amidst Safe-Haven Demand

Gold prices ascended, extending a remarkable seven-week streak of gains. This upward trajectory was fueled by a confluence of factors, including political uncertainties in the US and increasing expectations of a more accommodative monetary policy stance from central banks. The precious metal briefly touched an all-time high, underscoring its appeal as a hedge against economic and political instability.

While gold futures also concluded the week with substantial gains, reflecting strong investor interest in safe-haven assets, the prevailing geopolitical risks in Washington remained a significant driver. Analysts from UBS have projected further upside potential for gold, forecasting that it could surpass previous record levels in the coming months. This optimism is underpinned by the expectation of negative real interest rates and a potential weakening of the US dollar.

Oil Prices Decline on Supply Concerns and Weak Demand Signals

In contrast to the performance of precious metals, crude oil prices concluded the week with considerable losses. This downturn was largely dictated by the prospect of increased supply from the Organization of the Petroleum Exporting Countries (OPEC) and its allies. Both Brent and West Texas Intermediate (WTI) benchmarks experienced significant weekly declines, marking their largest drops in months.

Market sentiment was further pressured by expectations of a production increase in November and the anticipated resumption of oil flows from Iraq’s Kurdistan region. Adding to the bearish outlook, data from the Energy Information Administration (EIA) indicated an increase in crude oil and fuel inventories, signaling a softening of demand. This confluence of factors suggests a substantial surplus in the global oil market for the remainder of the fourth quarter and into early 2026, placing downward pressure on prices.

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Sources

• Homepage – U.S. Energy Information Administration (EIA)