Gold prices surged to a record high on Monday, surpassing the $3,900 per ounce mark, driven by investors seeking the safety of gold amid the US government shutdown, global economic instability, and the possibility of additional Federal Reserve interest rate cuts. The spot gold price rose by 1.5 percent to $3,942.59 per ounce, after reaching $3,949.34 earlier in the trading session. US gold futures for December delivery also climbed by 1.5 percent to $3,967.10.
In the event that negotiations between US President Donald Trump and congressional Democrats fail to end the partial government shutdown, Washington is prepared to initiate significant layoffs of federal employees, according to a senior White House official. Analysts pointed out that the demand for gold remains robust due to the ongoing government shutdown, with some investors experiencing fear of missing out on the current price levels, while others believe the opportunity has passed.
Gold prices have surged by nearly 50 percent this year, supported by increased purchases by central banks, rising demand for gold-backed exchange-traded funds, a weakening dollar, and growing interest from retail investors seeking a safe haven amidst escalating trade tensions and geopolitical uncertainties. The current upward trend in gold prices, primarily driven by central banks and long-term investors rather than speculators, suggests that any potential pullback may be less severe than anticipated, potentially offering buying opportunities during temporary dips.
Recent data from various sources indicate weaknesses in the US labor market due to the government shutdown. Market participants are anticipating a 25-basis-point interest rate cut at the upcoming Fed meeting, with an additional 25-basis-point cut expected in December. UBS forecasts gold to reach $4,200 per ounce by the end of the year, citing both fundamental and momentum-based factors supporting further price increases.
Gold, which does not pay interest, tends to perform well in environments of low interest rates and economic uncertainties. The surge in gold prices marks a significant milestone, as spot gold surpassed the $3,000 per ounce level for the first time in March. Numerous brokerage firms have expressed bullish sentiments regarding the ongoing rally.