WASHINGTON (dpa-AFX) - Gold prices moved modestly higher to hit a fresh record high on Tuesday, as the likelihood of a U.S. government shutdown has increased. In addition, the release of benign jobs data supporting rate cut expectations helped the yellow metal on the upside.
Front Month Comex Gold for October delivery has risen by $19.90 (or 0.52%) to $3,840.80 per troy ounce. Notably, gold prices have jumped nearly 11% so far this month. Gold ends the quarter up by 16.59% posting a record quarterly net gain.
Front Month Comex Silver for October delivery has fallen by 35.90 cents (or 0.77%) to $46.253 per troy ounce. Silver ended the quarter skyrocketing by 29.01%, which was also a record quarterly net gain.
The U.S. government is on the edge of a crisis as the federal government is facing a shutdown beginning 12:01 a.m., Wednesday, October 1.
A bill to allow the continuation of federal funding to run the government has been stalled as discussions between top Democrat and Republican leaders made no headway. While the Democrats want to amend healthcare funding before passing the bill, Republicans want to sign the bill first before any other negotiations.
With both sides refusing to budge, a shutdown and the consequent breakdown in essential services across the U.S. to all citizens seems inevitable.
White House is planning to implement mass layoffs instead of temporary furloughs (as was the practice during previous shutdowns), triggering long-term economic concerns.
The risk of a shutdown is seen as a positive for gold.
The U.S. Federal Reserve cut the interest rates by 25 basis points at its September 17 meeting. Last Friday's inflation numbers reinforced the expectations for additional rate cuts by the Fed.
However, a prolonged shutdown could leave the data-driven Fed without any reliable numbers (jobs report/CPI) to assess the economy. Markets depend on these indicators to set expectations for corporate earnings, interest rates, and currency valuations.
According to CME Group's FedWatch Tool, investors are betting on a 96.7% chance of a 25-basis-point interest rate cut at the Federal Reserve's October 28-29 meeting.
In China, the seven-day National Day 'golden week' holiday is starting from October 1. This year's National Day break overlaps with the Mid-Autumn Festival, creating an eight-day 'super golden week'.
The eight-day Golden Week holiday removes a key source of physical gold demand from the market.
Trading on the Shanghai Gold Exchange is closed until Thursday next week.
Meanwhile, the Russia-Ukraine conflict is deteriorating, with Russia escalating its aerial attacks on Ukraine, prompting Ukraine to seek U.S. military support.
U.S. President Donald Trump has backed a peace deal to end the Gaza war. However, he warned that its success lies in the hands of Hamas and added that if Hamas rejects the deal, Israel will have its way with full U.S. support.
Adding to market jitters, the new tariffs imposed by the U.S. last week on patented drugs, heavy trucks, and furniture are taking effect tomorrow.
Amid a global slowdown, geopolitical tension, and tightening monetary conditions, the U.S. shutdown is adding a new dimension to the volatility, which supports gold on the upside.
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