Gold Powers Toward $4,000 as US Government Shutdown Drags On

Gold surged to a record high, topping $3,945 an ounce and nearing $4,000, extending its 50% year-to-date rally amid a prolonged US government shutdown and increased economic uncertainty. This rally is primarily driven by robust inflows into gold-backed exchange-traded funds, expectations of further Federal Reserve rate cuts, and ongoing central bank diversification from the dollar. While the bullish environment persists, some analysts suggest a tactical pullback might be a healthy phase within the extended rally.

Analysis

(Bloomberg) -- Gold rose to a record — fast closing in on the $4,000-an-ounce mark — — as the US Federal government shutdown dragged on, and investors kept piling into bullion backed exchange-traded funds. The precious metal rallied as much as 1.5% to top $3,945 an ounce in the week’s opening session. The upswing — which follows a run of seven weekly gains — has lifted prices about 50% this year. Gold-backed ETFs swelled again last week. Most Read from Bloomberg The US shutdown has delayed key data, making a murky economic outlook more unclear. With a lack of official figures, traders are depending on private reports for signals, while the US central bank is also finding it challenging to assess changing conditions. Traders are still pricing in a quarter-point cut this month, which would benefit gold further as it doesn’t pay interest. Bullion has stormed higher this year, spurred by central-bank purchases as they diversify away from the US dollar. Economic and geopolitical uncertainties triggered by the Trump administration, as well as Federal Reserve rate cuts have also provided tailwinds. Investors have flocked to assets like gold, silver and Bitcoin, in what’s been dubbed the “debasement trade,” fueled by concerns about fiat currencies. Private investors piling into gold-backed exchange-traded funds have contributed to the latest leg in the rally, with total holdings expanding the most in more than three years last month. Strong flows continued in the first few days of October. Fund flows have “been nothing short of remarkable,” said Priyanka Sachdeva, an analyst at Phillip Nova Pte. It’s “a testament to how deeply embedded the ‘buy-the-dip-in-gold’ mindset has become,” she said. Gold rose 1.2% to trade at $3,932.54 an ounce at 3:31 p.m. in Singapore. The Bloomberg Dollar Spot Index advanced 0.3%. Silver, platinum and palladium all climbed. The “backdrop is intact with the Fed on path to cut rates further, alongside the weakening labor market,” said Ahmad Assiri, an analyst at Pepperstone Group Ltd. However, “it feels like the risk-reward dynamics are shifting and a tactical pullback would be viewed as a healthy phase within an extended rally,” he said. --With assistance from Preeti Soni. Most Read from Bloomberg Businessweek ©2025 Bloomberg L.P. Gold has surged to a record high, breaching $3,945 an ounce and advancing toward the $4,000 level, which marks a roughly 50% gain year-to-date following seven consecutive weekly increases. The rally is underpinned by a confluence of powerful macro factors, most notably the expectation of a quarter-point Federal Reserve rate cut this month, which enhances the appeal of non-yielding bullion. This monetary policy tailwind is amplified by significant safe-haven demand stemming from a prolonged US government shutdown that has obscured the economic outlook by delaying key data releases. Investor flows confirm this bullish sentiment, with holdings in gold-backed ETFs expanding at the fastest pace in over three years, reflecting what one analyst calls a 'deeply embedded buy-the-dip-in-gold mindset.' The move is further supported by strategic central bank diversification away from the US dollar and a broader 'debasement trade' that has seen investors flock to assets like gold and Bitcoin amid concerns over fiat currencies. Despite the strong upward momentum, one analyst has noted that risk-reward dynamics may be shifting, suggesting a tactical pullback could be a healthy consolidation within the extended rally.

Key Decisions for Investors

• Given the strong momentum and deeply embedded positive sentiment, investors with existing long positions in gold or gold-backed ETFs (e.g., GLD, IAU) might consider holding to target the psychological $4,000 per ounce level.
• Traders considering new or additional long positions should heed the analyst warning about shifting risk-reward dynamics and view any near-term tactical pullback as a potentially more favorable entry point rather than chasing the extended rally.
• Investors should closely monitor upcoming Federal Reserve communications, as the market's pricing of a rate cut is a critical pillar of the current rally; any hawkish deviation could trigger a sharp correction.
• The ongoing US government shutdown and central bank diversification from the dollar solidify gold's role as a strategic hedge, warranting its consideration for portfolio allocation against geopolitical uncertainty and potential fiat currency weakness.