Gold prices pushed to their peak by US Government shutdown
The US Government shut down yesterday amid a funding standoff, temporarily shuttering government agencies and leaving about 750,000 workers facing furlough.
Immediately following the shutdown, the spot price for gold reached a record high of $5904.61/oz. The spot price for gold has climbed nearly 50% since this time last year.
US Government shutdowns occur when there is a funding gap — when Democrats and Republicans cannot pass a bill funding government services into the new fiscal year (beginning October 1 in the US).
The shutdown is the first in nearly seven years and the third to occur with US President Donald Trump in office.
The last shutdown, spanning December 2018 through January 2019, was the longest in history, lasting 35 days.
Shutdowns strictly affect government workers, with ‘non-essential’ workers furloughed and ‘essential’ workers continuing to work without pay. However, the Trump Administration is reportedly looking to identify federal employees who can be permanently let go, in line with his campaign promise to reduce bureaucracy and government jobs.
While global impacts are generally short-lived and modest, this shutdown comes at a time of increased economic uncertainty.
The Federal Reserve cut interest rates in September for the first time since 2024 as concern around the US jobs markets grew, but further cuts were unclear and would hinge on continued jobs troubles.
The Federal Reserve is expected to make a decision on interest rates at the end of October. But the decision, directly tied to the state of jobs and inflation, has been clouded with jobs data from the Bureau of Labour Statistics, due on Friday, now delayed by the shutdown.
This uncertainty bodes well for gold, which serves as a hedge against economic and geopolitical risk, saw significant investment activity alongside high prices in the first half of 2025.
The total gold demand in Q2 CY25 reached 1,249t, a 3% increase year-on-year amid a high price environment.
Strong gold investment flows largely fuelled quarterly growth, as an increasingly unpredictable geopolitical environment and price momentum sustained demand, according to the World Gold Council.
At the time of release of the World Gold Council’s Gold Demand Trends Q2 2025 report, World Gold Council senior markets analyst Louse Street said the existing highly unpredictable macroeconomic environment could underpin further gains for gold.
“Any material deterioration in global economic or geopolitical conditions could further amplify gold’s safe-haven appeal, potentially pushing prices higher still,” she said.