Gold Prices Surge to Record High as U.S. Government Shutdown Continues
The price of gold has reached a fresh record high, surpassing $3,970 an ounce, as the prolonged U.S. government shutdown creates uncertainty in the market.
According to Bloomberg, gold prices have rallied by as much as 2.2% since the start of the week, with traders seeking safe-haven assets amidst the economic turmoil. The shutdown has delayed key data releases, making it challenging for investors to assess the economic outlook.
"We're seeing a perfect storm of uncertainty," said Peter Schiff, CEO of Euro Pacific Capital. "The government shutdown is creating a lack of clarity on the economy, and gold is benefiting from that."
Gold has risen more than 50% this year, with gold-backed exchange-traded funds (ETFs) swelling again last week. Options traders have continued to bet on further gains, adding bullish positions in SPDR Gold Shares ETF.
A trader sold 355 calls bought in late September when gold was lower and bought 370 calls equivalent to more than 26 million shares, betting on another 1.8% gain by the end of next week.
The prolonged shutdown has also raised concerns about the impact on economic data releases. "We're missing critical information that would help us understand the economy," said Mark Zandi, chief economist at Moody's Analytics.
Gold prices have been driven higher by central-bank purchases and a weakening dollar. The U.S. Federal Reserve is struggling to assess changing conditions amidst the shutdown.
The current situation has led some experts to predict further gains for gold. "We're seeing a perfect storm of uncertainty, and gold is benefiting from that," said Schiff.
As the government shutdown continues, investors will be closely watching economic data releases when they become available. The next key release is expected in mid-October, which could provide clarity on the economy and impact gold prices.
In the meantime, traders are relying on private reports for signals, adding to the uncertainty in the market. "We're seeing a lack of official figures, and that's creating volatility," said Zandi.
The prolonged shutdown has created an environment of uncertainty, with gold benefiting from it. As investors await clarity on the economy, gold prices are likely to remain volatile.
Background: The U.S. government shutdown began in late September, with key data releases delayed or cancelled. The shutdown has raised concerns about the impact on economic data and the ability of policymakers to assess changing conditions.
Additional perspectives:
"Gold is a safe-haven asset, and investors are seeking it out amidst uncertainty," said Schiff.
"We're seeing a lack of clarity on the economy, and gold is benefiting from that," said Zandi.
Current status: Gold prices have reached a fresh record high, surpassing $3,970 an ounce. Traders continue to bet on further gains, with options traders adding bullish positions in SPDR Gold Shares ETF.
Next developments: Investors will be closely watching economic data releases when they become available, particularly the mid-October release. The prolonged shutdown is expected to continue until a deal is reached between lawmakers and the White House.
*Reporting by Fortune.*
