Why is the Gold Price Soaring Amid US Shutdown Fears?
Click to start listening
Synopsis
As gold prices reach unprecedented heights, uncertainties surrounding a potential US government shutdown and weak labor data are driving expectations for interest rate cuts. Discover how these factors influence the precious metals market and why investors are turning to gold as a safe haven.
Key Takeaways
- Gold prices are at record highs due to US shutdown fears.
- Weak labor data increases expectations for interest rate cuts.
- Gold's performance outshines Indian equities for the fourth Diwali-to-Diwali cycle.
- Investors are seeking safety in precious metals.
- The dollar's decline makes gold more affordable for foreign buyers.
Mumbai, Oct 1 (NationPress) The gold price remains near an all-time high on Wednesday, fueled by escalating fears of a potential US government shutdown. Concurrently, disappointing labor statistics have heightened expectations for further interest rate cuts by the Federal Reserve.
The cost of 24-carat gold (10 grams) surged to a staggering Rs 1,15,350 on Wednesday, as reported by the India Bullion and Jewellers Association (IBJA).
On Tuesday, the closing price for bullion was Rs 1,16,903 per 10 grams according to IBJA data. Additionally, US gold futures for December delivery saw a 0.7 percent increase, reaching $3,901.
On Tuesday, precious metals experienced fluctuations, with both gold and silver retreating from earlier gains as traders took profits. However, both metals rebounded from their daily lows later in the evening session as hedging activities intensified.
In September, the price of the yellow metal jumped by 11.4 percent, marking the second-largest monthly increase since August 2011.
Experts indicate that the ongoing uncertainty surrounding US political discussions is fueling safe-haven demand, encouraging investors to turn to precious metals for protection.
The dollar index remained around a one-week low, making gold priced in dollars more accessible for international buyers.
Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, indicated that gold has support levels at $3830 to $3810, or Rs 1,15,800 to 1,15,180, with resistance at $3884 to $3910 or Rs 1,16,950 to 1,17,300.
For silver, support is seen at $46.60 to $46.30, while resistance ranges from $47.40 to $47.70.
In related news, India’s imports of gold and silver reached record levels in September, despite soaring prices, while the rupee's decline to unprecedented lows further bolstered domestic bullion prices. The US Senate's failure to pass funding legislation on Tuesday has brought the nation closer to a shutdown, with President Donald Trump threatening additional cuts to the federal workforce.
A government shutdown could postpone the release of vital economic data, including the non-farm payrolls report due on Friday.
Moreover, data revealing marginal growth in US job openings for August has amplified expectations for additional easing by the Federal Reserve, with traders anticipating a 97 percent chance of a 25-basis-point cut this month and a 76 percent likelihood in December. Gold has consistently outperformed Indian equities for the fourth consecutive Diwali-to-Diwali cycle, continuing a trend where the yellow metal has surpassed equities in seven of the past eight years.
Point of View
The current gold price surge reflects a blend of global economic uncertainties and local market dynamics. With the US government shutdown looming and weak labor data, it's evident that both domestic and international factors are driving investment towards precious metals. As always, Nation remains committed to delivering unbiased insights into such pivotal economic developments.
NationPress
01/10/2025
Frequently Asked Questions
What factors are influencing the rise in gold prices?
The rise in gold prices is primarily driven by fears of a US government shutdown and expectations of further interest rate cuts by the Federal Reserve, alongside the ongoing demand for safe-haven assets.
How did gold perform in September?
In September, gold prices surged by 11.4 percent, marking the second-highest monthly gain since August 2011.
What is the current support and resistance for gold?
Gold has support at $3830 to $3810 and resistance at $3884 to $3910.
How are silver prices trending?
Silver has support at $46.60 to $46.30 and resistance at $47.40 to $47.70.
What impact will a government shutdown have on the economy?
A government shutdown could delay the release of crucial economic data, including the non-farm payrolls report, which may affect market sentiments.
