Gold hits new all-time high as U.S. government shutdown dents risk appetite

Gold prices soared to new highs on Wednesday, as the U.S. government entered its first shutdown in almost seven years after lawmakers failed to reach a deal on government funding.

While the impact of government shutdowns on markets is usually minimal, the timing of this one is significant. Critical U.S. jobs data due to be published on Friday will be delayed, clouding the outlook for the Federal Reserve just weeks ahead of its next meeting. President Donald Trump has also threatened to use the shutdown to cut “a lot” of federal employees, who are ordinarily furloughed during a shutdown and brought back to work once it ends.

With no clear path toward a deal, it’s also unclear how long the shutdown will last. During Trump’s first term in office, a 34-day partial shutdown took hold — the longest in history.

Amid the uncertainty, risk assets lost ground, while gold — typically viewed as a safe haven asset in times of economic or geopolitical turbulence — continued its bumper rally to hit its 39th record high this year.

Spot gold was trading at $3,893.06 an ounce by 5:02 a.m. ET, while U.S. gold futures for December delivery extended gains to reach $3,918.10.

“Gold’s status as a safe haven is well publicized, but the inexorable rise in the gold price over the last few years has been truly astounding, with the metal hitting fresh highs today,” Michael Field, chief equity strategist at Morningstar, told CNBC in an email on Wednesday.

While he noted that the driver behind Wednesday’s rally was the U.S. government shutdown, Field argued that it was “just the straw that broke the camel’s back.”

“Two major ongoing conflicts, political instability in France, newly announced tariffs, all of this is combining to create a very unstable picture for investors,” he said. “And when the going gets tough, gold gets a boost.”

Philippe Gijsels, chief strategy officer at BNP Paribas Fortis, has long held the view that gold can cross the $4,000 mark — and he now believes the metal can go even higher.

“Gold is fast closing in on the 4000 target that we put forward … about a year and a half ago,” he said. “Back then, the move was solely driven by central bank buying while investors were net sellers of the yellow metal, [but] since the beginning of the year, investors have come on board which has clearly accelerated the move to the upside.”

He argued that amid ongoing uncertainty and volatility, and an environment of sticky inflation across the globe, investors were broadly taking the view that they should diversify away from the classic 60/40 portfolio strategy “with hard assets” like gold.

“Still, we are still very early in the game as gold, and gold related investments are barely 2% of an average investment portfolio worldwide,” Gijsels added. “To say it in baseball terms, we are only in the second or third inning. $4,000 [will not be] the endpoint — just the start of the strongest bull market in precious metals the world has ever seen.”

In a note to clients on Wednesday morning, UBS Strategist Joni Teves also argued that gold remains under-owned.

“We expect gold’s bull run to continue over the coming quarters, driven by rising investor positions and a continued broadening in gold’s investor base. With the Fed easing cycle under way, dollar weakness and declining real rates should be bullish for the gold price,” she said.

Teves noted that UBS expected the rally to taper off toward the end of 2026, in anticipation of the end of the Fed’s easing cycle and improving economic conditions.

“That said, given the structural shift in gold’s role to becoming a core part of strategic asset allocations, we expect the correction to ultimately be contained and for prices to stabilise at historically higher levels over the long run,” she added.