Gold price soars to new high on US government shutdown

[Redator]

Gold prices soared to a new record on Wednesday, lifted by safe-haven demand amid a US government shutdown, while softer jobs data reinforced expectations of a Federal Reserve rate cut this month.

Spot gold rose as much as 1% to $3,895.13 an ounce, surpassing its previous all-time high of $3,871.45 set just a day ago. US gold futures surged to as high as $3,922.70 per ounce, also a new high.

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Driving the rally was the economic uncertainty of a US government shutdown — the first in seven years —  which drove investors towards the safety of gold and assets like Bitcoin. The US dollar, meanwhile, continued to weaken, further bolstering the value of bullion.

“The dollar has been under pressure because usually when the government shuts down, the mood turns quite negative on the US and both the dollar and US equity markets are one of the casualties,” said Marex analyst Edward Meir, in a note to Reuters.

Year to date, bullion has risen by more than 48%, putting it on track for the biggest annual jump since 1979. Over half of the gains have come in the past month and a half, as investors braced for the US Federal Reserve to begin slashing interest rates. Gold typically performs well under low-rate environments, as the metal yields no interest.

Gold’s wild week: CEOs leave, prices soar, China rises

Wednesday also saw the release of the latest ADP jobs report, which showed the biggest monthly decline in seasonally adjusted US private payrolls since March 2023. Signs of economic slowdown have fueled increased bets on additional Fed rate cuts, with the market pricing in a 99% chance of the next one happening this month.

“The soft ADP jobs report is also not going to help the dollar. Yet another reason, slowing economy, meaning lower rates, all these things are bullish for gold,” Meir added.

$4,000 target

While investors continue to look out for US data to affirm their stance on the Fed’s policy path, the government shutdown could delay the release of several key economic indicators, including the closely watched non-farm payrolls (NFP) report scheduled for Friday.

Still, the rising uncertainty could play into gold investors’ hands. Major banks including UBS have recently upgraded their gold outlook to account for risk factors such as the US central bank’s independence. On Tuesday, Macquarie became the latest to lift its upside price target to $4,000/oz. for next year.

Deutsche Bank lifts gold price forecast to $4,000

“We are now seeing increased appetite from Western investors, both institutional and retail, as a case of ‘FOMO’ kicks in … Should this trend continue, we would not be surprised to see gold prices break above $4,000/oz.,” SP Angel wrote in a note.

(With files from Reuters)

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