Gold Futures Gains An Additional Bullish Driver; The US Government Shutdown, Closing Above $3900 For The First In History

Gold prices climbed on Friday, maintaining momentum near record levels as the precious metal approached its seventh consecutive weekly gain. The rally has been driven by growing concerns over the economic impact of a prolonged U.S. government shutdown and ongoing expectations of additional Federal Reserve interest rate cuts.

Spot gold rose 0.7% to $3,884.19 per ounce by 1:40 p.m. Eastern Time, following Thursday's record high of $3,896.49. The metal gained more than 3% for the week. U.S. gold futures for December delivery settled over 1% higher at $3,912.10 per troy ounce, marking a new record closing price.

Employment Data Delayed by Shutdown

Market participants had been anticipating insights into the Federal Reserve's future policy direction from the monthly non-farm payroll report, which provides crucial information about U.S. labor market health—a key factor that could influence the continuation of monetary easing.

The government shutdown, which began Tuesday night, has disrupted the release of critical employment data. The Bureau of Labor Statistics postponed its non-farm payrolls report, originally scheduled for Friday, indefinitely. Without official data, investors have turned to alternative indicators. The Institute for Supply Management's private-sector survey for September showed employment in the services sector declined for the fourth consecutive month, intensifying concerns about labor market weakness.

Political Gridlock and Economic Consequences

The shutdown stems from legislative dysfunction, as lawmakers failed to pass appropriations legislation amid disputes over spending and revenue. Many government services classified as "non-essential" have been suspended at the beginning of the fiscal period. CME Group polling data indicates 97% of traders anticipate further Federal Reserve rate cuts.

Tensions over monetary policy direction have characterized the current political environment. The administration has publicly pushed for lower interest rates, with President Trump repeatedly criticizing Federal Reserve Chairman Jerome Powell in unusually direct terms that depart from traditional executive-central bank protocol. While this rhetorical conflict has primarily influenced market sentiment, the government shutdown represents a concrete manifestation of deeper policy divisions within Washington, affecting American citizens, businesses, and the many countries and entities connected to the United States.

The Senate is scheduled to vote again on competing Democratic and Republican proposals to end the shutdown, now in its third day. However, neither plan appears likely to secure sufficient support for passage. With the key employment report delayed, investors have increasingly relied on secondary indicators suggesting labor market deterioration, reinforcing expectations of imminent monetary easing. According to CME Group's FedWatch tool, market participants are pricing in a 97% probability of a 25-basis-point rate reduction in October and an 85% likelihood of an additional quarter-point cut in December.

Mounting Economic Costs

The economic toll of the shutdown is substantial and growing. Initial estimates suggest the U.S. economy could lose approximately $7 billion in economic activity for each week the impasse continues. A White House memo from the Council of Economic Advisers, obtained by Politico, indicated the economic damage could reach as high as $15 billion per week, underscoring the significant macroeconomic consequences of the ongoing political gridlock.

Gold has surged over 47% year-to-date, reflecting both its safe-haven appeal and the favorable monetary policy environment, as an additional bullish catalyst for the precious metal has emerged.

Wishing you as always good trading,