Gold reaches historic $3,957 as US shutdown shakes markets

Mounting uncertainty from the prolonged US government shutdown has triggered a surge in safe-haven demand, propelling gold prices to a new historic high of USD3,957 per ounce at the start of the week.

The rally underscores gold’s enduring role as a safe-haven asset at a time when investors are seeking stability amid delayed economic data, falling bond yields and intensifying geopolitical risks.

Over the past month alone, gold has surged nearly 9 per cent, and compared to the same period last year, it has gained close to 50 per cent, marking one of the strongest year-on-year rallies in modern market history.

 The sustained climb reflects a growing appetite for risk-off assets as investors reassess the global economic outlook and monetary policy trajectory.

The US government shutdown, now in its second week, has disrupted the release of critical economic indicators, including the September non-farm payrolls report, a key metric for assessing the health of the American labour market.

Without this data, traders are left with limited visibility into the economy’s near-term performance, fuelling speculation that the Federal Reserve could begin cutting interest rates sooner than previously anticipated.

Market pricing now reflects about a 95 per cent probability of a 25-basis-point rate cut in October and an 84 per cent chance of an additional cut in December, according to CME FedWatch data.

Lower interest rates tend to boost the appeal of non-yielding assets such as gold, which become relatively more attractive when returns on bonds and savings accounts diminish.

“Gold’s surge reflects both the scale of uncertainty in Washington and the market’s growing conviction that the Fed will pivot towards rate cuts. Investors are hedging against policy paralysis and potential economic slowdown,” said a commodities strategist at Standard Chartered.

The precious metal briefly touched USD3,958.62 per ounce, just shy of its all-time intraday high, before easing slightly to around USD3,952 in late trading.