By Samer Hasn, Senior Market Analyst at XS.com
Gold surged to fresh record territory, climbing beyond $3860 for the first time and gaining more than 1%.
Gold quickly recovered from yesterday’s sharp correction, regaining strength and reaching $3860 per ounce today. The rebound signals that investor demand remains intact, with buyers stepping back in on dips rather than allowing the correction to deepen further.
Gold’s quick recovery fueled by mounting concerns over the implications of the ongoing U.S. government shutdown, which is said to be structurally different from past episodes, and by escalating geopolitical risks spanning the Middle East and Ukraine. These developments are amplifying hedging demand for gold as markets weigh the risk of shocks across multiple fronts.
Shutdowns historically weigh on growth, and according to The Wall Street Journal, the longer they last, the greater the economic damage. Hundreds of thousands of federal employees go without pay, stalling consumer spending, while critical economic reports such as jobs and inflation data are withheld, complicating planning for businesses and policymakers.
CNN noted that despite the ongoing shutdown, today’s labor data already being collected and might be released by Bureau of Labor Statistics.
The awaited data shall shed light on how fragile labor market is. ADP reported a loss of 32,000 jobs in September. That decline, far worse than expectations, highlights the fragility of the labor market and deepens concerns about hiring momentum, particularly among small businesses.
Adding to the uniqueness of this shutdown, Politico explains that unlike past episodes, both parties have factions that favor the impasse. Democrats face pressure from their progressive wing to resist Trump administration policies, while Republicans are attempting to reshape the federal workforce through layoffs. The political structure itself is different, with unilateral spending cuts under the Impoundment Control Act breaking down the usual bipartisan appropriations process. This makes navigation particularly complex and intensifies uncertainty for markets already grappling with data delays and weakening employment trends.
Yet despite the evident risks, markets have so far shown resilience. Bloomberg highlighted that the global stock market rally has extended for six straight sessions, buoyed by gains in technology and AI-related shares. Enthusiasm around partnerships such as Hitachi and Fujitsu with OpenAI and Nvidia has fueled momentum, pushing U.S. equities to record highs. This optimism has softened the immediate sense of danger from the shutdown, helping explain why gold’s move, though forceful, has not yet been a runaway surge.
On the geopolitical front, tensions set to elevate. According to The Washington Post, U.S. allies in the Middle East fear another round of Israeli airstrikes could be imminent. Israeli media outlets have also begun discussing the possibility of the next war, suggesting that escalation risks remain very real.
Ukraine also might be able to strike even further inside the Russian territory using US curies missiles, which will escalate the war to a whole new level. Such developments provide a powerful tailwind for gold and renew appeal as investors brace for possible shocks.