Gold prices experienced significant volatility this week due to a scarcity of official economic data amid the US government shutdown, leaving markets without clear guidance. Prices stabilized on Friday, while silver saw gains.

Gold is currently trading around $4,160 per ounce, narrowing earlier intraday gains but still on track for its first weekly advance in a month. Silver has risen nearly 9% this week, approaching last month’s record high.

This week’s gold rally may have been amplified by a so-called "gamma squeeze," a technical scenario where traders selling cheap options are forced to buy gold futures for hedging. In thin markets, sudden price surges can trigger urgent buying, potentially snowballing into a sharp rally even without fresh demand from physical buyers.

Daniel Ghali, a strategist at TD Securities, noted in a Thursday report that gold’s rebound aligns with this dynamic—recent declines in over-the-counter trading volumes have made the market more susceptible to momentum. "This liquidity vacuum could be the key catalyst for the gamma squeeze, driving gold’s secondary surge this week," he said.

Though gold has retreated from last month’s all-time high above $4,380, it remains up nearly 60% year-to-date, poised for its best annual performance since 1979. Central banks have ramped up gold purchases as a store of value and diversification tool, while investors flock to the metal as a hedge against fiscal concerns in major economies.

Meanwhile, markets are divided over whether upcoming US economic data—resuming after the longest government shutdown in history—will show sufficient weakness to justify further Federal Reserve rate cuts.

Expectations for cuts cooled this week as Fed officials signaled reluctance to lower borrowing costs. Minneapolis Fed President Neel Kashkari said he hasn’t decided on next month’s rate move, while Cleveland Fed President Beth Hammack advocated holding rates steady.

Swap traders trimmed bets on a December Fed rate cut to about 50%, down from over 60% earlier this week.

As of 10:42 AM London time, gold dipped 0.1% to $4,166.95/oz, while the Bloomberg Dollar Spot Index rose 0.1%. Silver gained 0.8% to $52.71/oz, while platinum and palladium declined.