Onome Amuge
Gold soared to an all-time high on Monday, breaching the $3,900 mark and briefly touching $3,970 per ounce, as deepening political uncertainty in the United States and renewed expectations of a Federal Reserve rate cut drove investors into safe-haven assets.
Spot gold (XAU/USD) was last up 1.73 per cent at $3,952, extending a weeks-long rally that has seen bullion outperform most major asset classes. The gains came as the U.S. government shutdown stretched into a second week with little sign of resolution, amplifying investor unease over fiscal stability and economic momentum ahead of the Fed’s October 29 policy meeting.
The political impasse in Washington has effectively paralysed government functions, with Republican leaders in the House reportedly instructing members to stay away from the capital as negotiations remain stalled. The prolonged shutdown has heightened fears of a delayed recovery in public spending and wider economic disruptions, reinforcing the appeal of gold as a hedge against uncertainty.
Money markets are now pricing in a 94 per cent probability that the U.S. central bank will lower interest rates by 25 basis points at the end of October, according to data from Prime Market Terminal. The shift follows a string of weaker U.S. macroeconomic readings that have bolstered the case for monetary easing.
At the same time, global political turbulence added to the metal’s upward momentum. In Europe, France’s Prime Minister Sébastien Lecornu resigned less than a month into office, while in Asia, Japan’s ruling Liberal Democratic Party elected Sanae Takaichi as its new leader over the weekend. The leadership reshuffles injected fresh volatility into markets already jittery over geopolitical risks, including renewed ceasefire talks between Israel and Hamas in Cairo.
Despite the dollar’s modest rebound, gold continued to climb, a rare occurrence that highlighted the intensity of risk aversion. The U.S. dollar index (DXY), which measures the greenback against a basket of six peers, rose 0.4 per cent to 98.09, while benchmark 10-year Treasury yields edged up four basis points to 4.16 per cent. Real yields, adjusted for inflation expectations, also ticked higher to 1.83 per cent, yet the traditional inverse correlation with bullion prices appeared to weaken as safe-haven demand dominated.
“Normally, higher yields would be a headwind for gold,” said Scott Bessent, U.S. Treasury Secretary, speaking at a private forum cited by Fox News.
The Treasury Department also confirmed that interviews for the next Federal Reserve Chair had entered their final stage, with 11 candidates under consideration. The leadership transition, expected to conclude this month, has added another layer of uncertainty to monetary policy outlooks.
From a technical perspective, analysts said gold’s latest increase leaves the metal well within overbought territory but still supported by strong momentum. The relative strength index (RSI) remains in the 70–80 band, typically a bullish signal when sustained during trending markets.
Still, some analysts cautioned that the pace of the rally could invite profit-taking, particularly if political developments in Washington show signs of progress or if the Fed adopts a less dovish tone. “Gold’s near-parabolic rise reflects both panic and positioning,” said Chris Beauchamp, chief market analyst at IG Group.
If momentum holds, analysts expect the metal could soon breach the $4,000 mark,a level once considered implausible but now within sight amid the convergence of economic fragility and political paralysis.
