Gold Soars to New Heights Driven by U.S. Shutdown and Weak Economic Data
Gold reached new record levels on Wednesday, surpassing the $3890 per ounce mark, as investors flocked to safe havens with the onset of the U.S. government shutdown, while labor market data came in weaker than expected, bolstering expectations for the Federal Reserve to move towards cutting interest rates.
Gold prices in spot trading jumped by 0.8% to reach $3892.21 per ounce, while December gold futures rose by 1.1% to record $9316.00.
This strong rise was supported by the U.S. government issuance that sparked fears of a potential political and economic crisis, alongside disappointing labor market data that showed only slight growth in job vacancies in August with a decline in hiring rates, prompting traders to favor two interest rate cuts before the end of the year.
Nicolas Frabel, head of institutional markets at ABC Refinery, expressed optimism to Reuters, stating: "Gold is currently benefiting from concerns about a weak dollar, the political crisis resulting from the government shutdown in the United States, as well as general geopolitical uncertainty." He added that "the outlook remains bullish with targets exceeding $3900, potentially reaching up to $4000 per ounce."
Despite this strong performance, Michael Hsu, a precious metals analyst at Deutsche Bank, believes that several factors could hinder gold's upward trajectory, including the possibility of a rising dollar, or an unexpected shift by the Fed towards a more hawkish monetary policy, or the occurrence of financial reforms in the United States.
It is worth noting that gold has benefited from declining yields as China's markets—the largest consumer of the metal in the world—remain closed due to a public holiday, with trading set to resume on October 9. The precious metal has risen by more than 47% since the beginning of the year.
Silver saw a notable increase in spot transactions of about 1% to reach $47.09 per ounce, marking the highest level in over 14 years. Meanwhile, platinum fell by 0.2% to $1570.85, while palladium dropped by 0.7% to $1248.45.
