Gold Price Hits New Record As US Government Enters Shutdown

Gold prices climbed to a record high on Wednesday as the U.S. government entered its first shutdown in nearly seven years, after the Republican-controlled Senate failed twice to get a temporary spending bill passed.

Spot gold prices climbed to a new high of $3,895 per troy ounce, surging by almost 1% before paring some of the gains. Gold futures maturing in December gained 1% to hover around $3,911 at the time of writing.

Adding to the lure of gold is the growing expectation of the Federal Reserve cutting interest rate in the October meeting. According to data from the CME FedWatch tool, there is a 94.6% probability of a 25 basis point cut later this month.

With the U.S. government having entered a shutdown, there is a possibility of a delay in the release of the non-farm payrolls (NFP) report, which is scheduled to be released on Friday. The nonpartisan Congressional Budget Office estimated on Tuesday that a government shutdown could result in the furlough of nearly 750,000 federal employees, which could also result in delays in the release of key economic data.

However, that might not impact the Fed’s decision, according to Julius Baer analyst Carsten Menke. "Most likely the Fed doesn't really need (the NFP) report to make up its mind because U.S. interest rates are still above the neutral rate, so monetary policy is restrictive and if the economy is slowing, you need to get towards the neutral rate at least," Menke said, according to a Reuters report.

Meanwhile, U.S. equities declined in Wednesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down 0.38%, while the Invesco QQQ Trust (QQQ) fell 0.42%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bearish’ territory.

The SPDR Gold Shares ETF (GLD) was up 0.53% at the time of writing, while the iShares Gold Trust ETF (IAU) was up 0.52%. The GLD and IAU ETFs have both surged nearly 47% year-to-date.

Also See: Ford CEO Jim Farley Says Buyers Prefer $30,000 EVs Over $75,000 Utility Vehicles: Report

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