Gold prices surged to a record high on Tuesday, surpassing $3,800 per ounce globally, driven by escalating concerns over a potential U.S. government shutdown and expectations of further interest rate cuts by the Federal Reserve.
Spot gold reached a peak of $3,833.37 per ounce, while December futures climbed to $3,894.90, marking a 12.1% increase for the month of September—the strongest monthly performance since August 2011.
In India, domestic gold prices mirrored the global trend, jumping to an all-time high on the Multi Commodity Exchange (MCX). Gold December futures surged to a new peak of ₹1,17,351 per 10 grams, reflecting strong safe-haven buying amid heightened investor concerns over the potential U.S. shutdown and associated market volatility.
Investor demand for safe-haven assets intensified as the deadline for a government funding agreement approached.
Without a deal, a federal shutdown could commence as early as Wednesday, disrupting economic data releases and potentially delaying key reports such as the September employment figures.
Analysts noted that the uncertainty surrounding the shutdown contributed to a weakening U.S. dollar, further boosting gold’s appeal.
The rally in gold was also supported by expectations of additional rate cuts by the Federal Reserve.
Traders are pricing in a high probability of a 25 basis point reduction in the upcoming Federal Open Market Committee meeting.
The prospect of lower interest rates diminishes the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors.
Central banks and institutional investors have been increasing their gold holdings in response to these developments.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.60% rise in holdings to 1,011.73 metric tons, the highest level since July 2022.
While gold has reached new heights, experts caution that the market may be approaching overbought territory. Some analysts suggest that the current rally is driven by a combination of geopolitical tensions, economic uncertainties, and speculative investments, which could lead to increased volatility in the short term.
Despite these concerns, the outlook for gold remains positive, with many investors viewing it as a hedge against economic instability and currency fluctuations.
As the situation in Washington continues to unfold, gold’s status as a safe-haven asset is likely to remain a focal point for investors seeking to mitigate risk in an uncertain global economic environment.
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