Gold prices hit record $3,900 as US government shutdown continues
What's the story
Gold prices have hit a new record high, breaching the $3,900 mark for the first time ever. The surge is mainly due to safe-haven demand amid a US government shutdown and expectations of more Federal Reserve rate cuts. Spot gold rose by 0.4% to $3,900.4 per ounce after hitting an all-time high of $3,919.59 earlier in the session.
Futures rise
US gold futures also see significant increase
Along with spot gold, US gold futures for December delivery have also seen a significant increase. The contracts rose by 0.5% to $3,926.8 per ounce. This upward trend in both spot and future prices indicates a strong market response to the current economic conditions and expectations of further monetary policy changes by the Federal Reserve.
Rate cuts
Federal Reserve's interest rate impact on gold prices
The Federal Reserve's stance on interest rates has a major impact on gold prices. Non-yielding gold thrives in low-interest-rate environments and during economic uncertainties. Fed Governor Stephen Miran has called for an aggressive rate cut trajectory, citing the impact of Trump administration's policies on the economy. According to CME FedWatch tool, investors expect further 25-basis-point cuts in October and December with probabilities of 95% and 83%, respectively.
Market trends
Gold's stellar performance in recent years
Gold has jumped 49% this year after a 27% rise in 2024. The surge is due to strong central bank buying, increased demand for gold-backed Exchange-Traded Fund (ETFs), a weaker dollar, and growing interest from retail investors seeking a hedge amid rising trade and geopolitical tensions. These factors have contributed to gold's stellar performance in recent years, making it an attractive investment option during uncertain times.