**Gold Prices Rise as US Government Shutdown Fears Fuel Safe-Haven Demand, Near Record Highs**
*By FXStreet Staff, adapted and expanded with additional insights*
Gold prices have resumed their upward trajectory amid growing concerns surrounding a potential U.S. government shutdown, which has bolstered investor demand for safe-haven assets. The yellow metal is also benefiting from a slightly weaker U.S. dollar and a pullback in Treasury yields, adding fuel to its recent rally. Currently, gold remains within striking distance of its all-time highs as investors assess macroeconomic uncertainty, Federal Reserve rate expectations, and geopolitical risks.
This updated article expands upon the original coverage by FXStreet’s editorial team, offering additional insights and data to understand the broader trends behind gold’s latest surge.
## Key Highlights
– Spot gold (XAU/USD) has climbed above $2,030 per ounce after dipping earlier in the week.
– Uncertainty over a potential U.S. government shutdown is a key driver for increased safe-haven demand.
– U.S. Treasury yields have slipped, reducing the opportunity cost of holding gold.
– The U.S. dollar is moderately weaker, further supporting gold prices.
– Markets are closely watching upcoming labor market data for clues on Fed policy.
– Gold remains close to its all-time intraday high of $2,072.49, reached in August 2020.
– Traders eye key resistance near $2,050, with the potential to test or breach record levels in the coming weeks.
## Gold Gains Amid US Political Gridlock
Fears over a U.S. federal government shutdown have increased demand for safer assets, namely gold. If the two major political parties in Congress fail to come to an agreement on the federal budget, a partial shutdown could take place. Historically, such shutdowns have caused disruptions in public services and added stress to financial markets.
– The U.S. Senate and House of Representatives have struggled to pass a full-year spending bill, with hardline stances on immigration, defense, and domestic spending creating a legislative deadlock.
– As of the latest update, a last-minute temporary funding measure known as a “continuing resolution” is under debate but remains uncertain.
– Investors often turn to gold during periods of political instability, viewing it as a hedge against systemic risk and economic volatility.
## Treasury Yields Retreat, Supporting Pricier Metals
The recent decline in U.S. Treasury yields has also played a role in supporting gold prices. Lower yields reduce the opportunity cost of holding non-yielding assets like gold, making the precious metal more attractive to yield-sensitive investors.
– The yield on the U.S. 10-year Treasury note dropped to around 4.33%, down from 16-year highs eclipsing the 4.5% level in September.
– Short-term yields, like those on two-year bonds, also edged lower ahead of key economic data and the looming shutdown.
– Bond prices rise when yields fall, suggesting a significant shift in risk sentiment and expectations of slower economic activity.
## Dollar Index Edges Lower, Adding Momentum
While the U.S. dollar remains strong in a broader historical context, it has recently weakened slightly against a basket of major currencies. That downside pressure has provided added fuel for gold prices, given that gold is priced in dollars and becomes cheaper for foreign buyers when the dollar falls.
– The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies including the euro, yen, and pound sterling, declined to near the 103.50 level.
– Speculators and hedge funds have tempered their long-dollar positions amid mixed U.S. economic data and evolving Fed rate expectations.
– A weaker dollar typically boosts commodities like gold that are priced in dollars and inversely correlated with the currency’s strength.
## Federal Reserve Policy Outlook Remains Unclear
Central to gold’s trajectory is the path of interest rates in the United States. Data released recently have painted a mixed picture of the U
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