Gold Set for Best Week in a Month as Data Gap Clouds US Outlook

Gold rose on Friday, heading for its best week in a month, as traders wrestled with uncertainty around a backlog of data to follow the US government’s return from a six-week shutdown. Silver also gained.

Bullion was trading above $4,200 an ounce, on track for a weekly gain of around 5% and wiping out losses from the previous session. Expectations of another US rate cut prompted by a weak economic outlook remain a tailwind for the precious metal, which doesn’t pay interest. Silver’s five-day advance was more than 10%, inching closer to a record hit last month.

Gold’s rise this week may also have been amplified by a so-called “gamma squeeze,” a technical pattern whereby dealers who sold cheap options are forced to buy bullion futures as a hedge. In a thin market, any sudden rise in price can increase the urgency to buy and snowball into a surge even without fresh demand from physical buyers.

Gold’s recovery this week fits this dynamic, Daniel Ghali, a strategist from TD Securities, said in a note on Thursday, with a recent drop in over-the-counter trading volumes making the market easier to push around. “This liquidity vacuum may actually have been key for setting up a gamma squeeze, resulting in a second shock wave higher this week,” he said.