WASHINGTON (dpa-AFX) - Gold prices saw modest strength on Friday amid political upheavals in France and Japan, ongoing global economic uncertainty compounded by the U.S. government shutdown and market expectations of a rate cut by U.S. central bank.
Front Month Comex Gold for October delivery rose by $29.60 (or 0.75%) to $3,975.90 per troy ounce.
Notably, gold prices skyrocketed by $95.10 (or 2.45%) per troy ounce for this week, increasing for the eighth straight week.
Front Month Comex Silver for October delivery posted incremental gains by 8.80 cents (or 0.19%) to $46.938 per troy ounce. Silver fell 65.90 cents (or 1.38%) per troy ounce for this week.
The U.S. government shutdown enters the day number 10 today.
The partial closure, which began on October 1 due to a failure of the Congress to pass a short-term spending bill as a result of contentious disagreement between the Republicans and Democrats, is set to extend into the third week. Around 750,000 federal employees have been furloughed.
Democrats are demanding an extension of Obamacare healthcare subsidies that are due to expire on December 31, 2025, while Republicans insist on passing the spending bill first and negotiating everything else later. Both political parties are trading accusations of blame for the standoff.
Yesterday, U.S. Senators once again rejected a funding proposal brought by Republicans and the Senate has been adjourned until next Tuesday.
Economists speculate that the shutdown has resulted in around $6 billion per week losses in productivity and delay in contracts. The longer the shutdown extends, the larger will be the economic losses.
The resultant economic uncertainty in the U.S. is a primary factor pushing gold prices on the upside.
After the Israeli government approved the first phase of the ceasefire and hostage return deal proposed by U.S. President Donald Trump last week, Palestinians are beginning to return to northern Gaza.
Now, as per the deal, militant group Hamas is expected to release 20 Israeli hostages within 72 hours after which Israel will release 250 Palestinian prisoners and 1,700 others detained in Gaza.
These developments, seen as strong signals of peace returning in the Middle East, capped the yellow metal's gains.
Russia and Ukraine are targeting each other's energy sites. While Ukraine is focused on Russia's oil-refining facilities, Russian forces are aggressively undoing Ukrainian gas production facilities and energy infrastructures. The consequent geopolitical tension lifted gold prices.
Political crisis in France (deeply entrenched in debt) intensified with the resignation of Sebastien Lecornu this Monday. Austerity measures and spending cuts are resisted stiffly by the opposition, resulting in five prime ministers exiting in less than two years. President Emmanuel Macron is searching for a sixth prime minister now.
In Japan, the Liberal Democratic Party recently selected hardliner Sanae Takaichi as the Prime Minister-elect. While she was expected to win approval in parliament, in a sudden turn of events, her party's junior coalition partner quit and the opposition is planning for an alternative candidate.
The change of guard in two major economies is also compounding the uncertainty prevalent in the global economy, helping non-yielding gold.
Meanwhile, Trump has threatened to massively increase tariffs on China in retaliation for export curbs on its rare earth minerals essential for manufacturing and technology.
The U.S. shutdown has stalled releases of key economic data for the second week now. However, analysts are still pricing in another rate cut by the Federal Reserve this month.
Expectations of a Fed rate cut is another contributor to the rise in precious metal's prices.
According to CME Group's FedWatch Tool, investors are betting on a 94.6% chance of a 25-basis-point interest rate cut at the Fed's upcoming October 28-29 meeting.
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