Gold surged as US lawmakers moved closer to ending the longest government shutdown in American history, a move that would help lift the fog around the Federal Reserve’s path on interest rates.
Bullion jumped as much as 2.9% to trade above $4,115 an ounce. The White House on Monday expressed support for the bipartisan deal to end the shutdown, a key development that makes it likely the government reopens within days.
The Fed will likely inject more money into the system to counter a partial liquidity drain during the shutdown, said Nicky Shiels, head of research at precious metals refiner MKS Pamp SA. She noted that New York Fed president John Williams said the central bank may soon need to expand its balance sheet for liquidity needs.
“Gold and silver like the prospect of either more liquidity being pumped into the system or higher asset prices,” Shiels said.
Meanwhile, ending the shutdown would give investors greater clarity on key official economic data such as jobs and inflation.
“A reopening would restore data flow and revive expectations for a December rate cut, but more importantly it shifts market focus back to the deteriorating US fiscal outlook,” Ole Hansen, commodities strategist at Saxo Bank A/S, wrote in a note. “Rising yields driven by fiscal anxiety, rather than economic strength, have historically been supportive for investment metals.”
It’s not yet clear how quickly the shutdown can end. The Senate will need the consent of all members for it to happen quickly. Any one senator can force days of procedural delays. Meanwhile, Speaker Mike Johnson has said he will give House lawmakers two days’ notice to return to Washington.
Gold has retreated around 6% since hitting a record high above $4,380 an ounce in mid-October. It’s still up more than 56% this year, and most of the factors that have propelled the blistering rally — heightened economic and geopolitical uncertainties, and elevated central bank buying — remain in place.
Spot gold rose 2.7% to $4,108.96 an ounce as of 2:04 p.m. in New York. The Bloomberg Dollar Spot Index was steady. Silver jumped 4.4%, and platinum and palladium also advanced.