Gold Hits Fresh Record as US Shutdown Jitters Drive Haven Demand

One-ounce gold coins. Photographer: Chris Ratcliffe/Bloomberg

(Bloomberg) -- Gold rose to another record, extending Monday’s surge as the prospect of a looming US government shutdown clouded the Federal Reserve’s monetary policy path ahead of next month’s interest-rate decision.

Bullion gained as much as 0.9% to an all-time $3,867.25 an ounce, eclipsing the peak reached in the previous session when it closed up 2%. A meeting between top congressional leaders and President Donald Trump ended without a deal on the government’s short-term funding. That’s fanned fears of a shutdown, which could hinder the release of economic reports — depriving investors of crucial data needed to assess the US economy.

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Newmont Corp. and Barrick Mining Corp., meanwhile, both announced a change to their leadership on Monday. The exit of Newmont’s Tom Palmer on Dec. 31 was largely expected, but the departure of Barrick’s Mark Bristow came as a surprise. The companies are the world’s two largest gold producers.

Gold has soared 47% this year, on track for the biggest annual gain since 1979, and has set a series of records on central-bank demand and a resumption of interest-rate cuts by the Fed. Goldman Sachs Group Inc. and Deutsche Bank AG have said they expect the rally to extend.

US Treasuries also gained on Monday while the dollar declined, partly due to worries over a potential shutdown. Lower yields on US government bonds tend to benefit precious metals, which do not pay interest, while a weaker greenback makes dollar-denominated bullion cheaper for most buyers.

“Gold hasn’t usually internalized past 11th-hour negotiations over a US government shutdown, but it also wasn’t in a berserk bull market rally during past shutdown instances,” Nicky Shiels, Geneva-based MKS PAMP SA head of metals strategy, wrote in a note. “It’s internalizing an expected subdued jobs growth in September and perhaps some US shutdown threat.”

In other precious metals, silver and platinum took a breather on Tuesday, after charging to multi-year highs in the previous session. The metals are up about 63% and 76% year-to-date, respectively, with gains underpinned by persistent market tightness as several years of supply deficits come to a head.

Lease rates — which reflect the cost of borrowing metal, generally for a short — for silver, platinum and palladium have all surged well above their normal levels of close to zero, raising concerns about dwindling stockpiles in London. Inflows into ETFs backed by the metals also added to the crunch.

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Spot gold traded up 0.8% to $3,864.69 an ounce as of 12:22 p.m. in Singapore. The Bloomberg Dollar Spot Index was flat, after closing 0.2% lower in the previous session. Silver and palladium edged higher, while platinum dipped.

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