Gold hits record high as U.S. government shutdown dents risk appetite
When the closure of the US government began on Wednesday, gold prices broke a record.
Chris McGrath | Getty Images News | Getty Images
The US government rose to new peaks on Wednesday, as the US government entered its first closure in almost seven years after not getting an agreement on government financing.
Although the effect of the closing of the government on markets is usually minimal, the timing of this is important. Critical US job data to be published on Friday will be postponed and only weeks before the next meeting will blur the appearance of the Federal Reserve. President Donald Trump also threatened to use closing to cut the “too much” part of the federal employees who were normally furry during a closure and brought back to work.
Without a clear way to an agreement, it is also unclear how much it will last. A partial closure of 34 days in Trump’s first term of office. The longest in history.
Average market changes according to recent closures
| Closure time | Full days | Closure type | S&P 500 (%) Net Change | Vix Net Change Points | DXY NET CHANGE | 10 -year net change |
|---|---|---|---|---|---|---|
| 12/22/18-1/25/19 | 35 | Partial | 6 | -8 | -2 | -17 |
| 1/20/18-1/22/18 | 3 | Partial | 2 | 4 | -2 | 15 |
| 10/1/13-10/17/13 | 16 | Full of | 3 | -1 | -2 | -14 |
| 12/16/195-1/6/96 | 21 | Full of | -3 | 4 | 0 | 1 |
| 11/14/95-11/19/95 | 5 | Full of | 3 | -1 | 1 | -10 |
| 10/5/90-10/9/90 | 3 | Partial | -5 | 3 | -3 | 2 |
| Average | 1 | 0 | -1 | -4 |
Source: Bank of America
In the midst of uncertainty, risk assets lost the ground, typically seen as a safe presence in economic or geopolitical turbulence times – the 39th of this year continued the rally to break the bumper rally.
Spot Gold was traded by 5:02 am at $ 3,893,06, USA Gold Futures Transactions Gains for Delivery for December reached $ 3.918.10.
Is $ 4,000 gold?
“Gold’s status was well announced as a safe shelter, but the brutal increase in the gold price in the last few years was really surprising that metal reached fresh peaks today,” Morningstar’s head summarizing strategist Michael Fieldada said on Wednesday. He said.
On Wednesday, the driver behind the rally was the closure of the US government, while Field argued that “the straw that breaks the back of the camel’s back”.
“Two important conflicts, political instability in France, newly announced tariffs, all of which come together to create an unstable picture for investors.” He said. “And when it gets harder, it gets a golden support.”
Spot Gold Price
BNP Paribas Fortis Chief Strategy Officer Philippe Gijsels has long acknowledged the view that gold can cross $ 4,000 for a long time – and now he believes that metal can rise further.
“Gold is closing rapidly to the 4000 targets we have put forward about a year and a half ago,” he said. “At that time, while investors were the net vendors of the yellow metal, the movement was directed only by purchasing the Central Bank. [but] Since the beginning of the year, investors have reached the ship that clearly accelerated the upward movement. “
In the midst of an ongoing uncertainty and volatility and a sticky inflation environment around the world, investors have widely diversified from the classic 60/40 portfolio strategy to “difficult beings such as gold”.
“Nevertheless, the game is still very early in gold and gold -related investments are almost 2% of an average investment portfolio worldwide.” “To say in terms of baseball, we are only in the second or third shot. $ 4,000 [will not be] Last Point – the most powerful bull market in the precious metals of the world. “
On Wednesday morning, as a note to customers, UBS strategist Joni Teves argued that gold was low.
“We expect Gold’s Bull Run to continue in the coming quarters with the rising investor positions and the continuous expansion of Gold’s investor base. The FED alleviating cycle continues while the dollar weakness and decreasing real rates should rise for gold price.” He said.
TEVES, UBS’nin rally, the Fed’s mitigation cycle ends and the expectation of improvement of economic conditions, expecting to move towards the end of 2026, he said.
“Considering Gold’s structural change in the role of being a fundamental part of strategic assets allocation, we expect the correction to be finalized and that the prices will be stabilized at historically higher levels in the long run.”
– Alex Harring from CNBC contributed to this article.
