HG MARKETS:

Gold prices reached a record high in Asian trading on Monday, driven by a combination of safe-haven buying and expectations for lower U.S. interest rates.

Key Drivers of the Surge

The rally in gold and other precious metals was fueled by two main factors:

U.S. Government Shutdown Risk: Markets are currently anxious about a potential U.S. government shutdown, as funding for federal operations is set to expire at midnight on September 30th. Despite ongoing bipartisan negotiations, Congress has yet to pass a replacement or extension funding bill. This political uncertainty is driving investors toward haven assets like gold.

Political Tensions: The situation is complicated by Republicans reportedly pushing for a short-term funding bill through November, while Democrats are demanding a reversal of recent spending cuts before approving more funds. Congressional leaders are scheduled to meet with President Donald Trump to mediate the issue.

Economic Impact: A shutdown, if prolonged, could severely disrupt economic activity. For instance, the last major shutdown in late 2018/early 2019 lasted 35 days and was estimated to have reduced GDP by $11 billion. Furthermore, a shutdown could delay the release of important economic data, such as the nonfarm payrolls report, due this Friday.

Federal Reserve Rate Cut Bets: Optimism that the Federal Reserve will continue cutting interest rates is supporting bullion. Last week’s in-line inflation data kept markets confident that the Fed has room to implement further rate cuts. Lower interest rates decrease the “opportunity cost” of holding non-yielding gold, making it more appealing to investors.

Broader Precious Metals Rally

The overall strong sentiment against a weaker U.S. dollar led to significant gains across the precious metals complex:

Silver surged over 2% to hit a 14-year high of $47.03 per ounce.

Platinum also saw a sharp rally, climbing 3% to an over 12-year high of $1,619.78 per ounce.