Gold rallied near $4,000-an-ounce on Monday as the prolonged US government shutdown deepened economic uncertainty and spurred investors to seek refuge in bullion-backed exchange-traded funds (ETFs).
The precious metal climbed as much as 1.5 percent in the week’s opening session to reach $3,945 an ounce, marking a fresh record and extending its winning streak to seven consecutive weeks.
Gold prices have now advanced about 50 percent year-to-date, driven by strong safe-haven demand, central-bank buying, and persistent weakness in macroeconomic confidence.
ETF holdings linked to gold expanded again last week, adding to the largest monthly inflow in more than three years.
Analysts attribute the sustained interest to investors hedging against political instability, inflation, and the potential impact of fiscal gridlock on global growth.
Policy and Market Uncertainty Fuel Demand
The continuing US shutdown has delayed the release of key economic data, leaving markets without the official guidance usually provided by agencies such as the Labor Department and the Bureau of Economic Analysis.
Traders are now relying on private reports and alternative indicators to gauge the health of the world’s largest economy.
With limited data and weakening sentiment, expectations have solidified around a quarter-point rate cut by the Federal Reserve later this month — a move that would further enhance gold’s appeal because the metal carries no yield.
Chris Weston, Head of Research at Pepperstone Group, said the situation “reflects an environment where uncertainty reigns, and gold remains the purest hedge.”
He added that while the current rally may moderate, “the broader uptrend is underpinned by strong policy and structural tailwinds.”
Central Banks and Private Investors Drive Momentum
A parallel surge in central-bank purchases has reinforced the uptrend. Several emerging-market monetary authorities have been accumulating bullion to diversify reserves and reduce exposure to the US dollar.
Private investors have followed suit. Gold-backed ETFs posted the strongest increase in assets since 2022, signaling renewed conviction in the so-called “buy-the-dip” mindset.
Priyanka Sachdeva, an analyst at Phillip Nova Pte, described the inflows as “nothing short of remarkable,” noting that “investors have internalized gold as the ultimate hedge against financial and political risk.”
The rally has also spilled over into other precious metals. Silver, platinum, and palladium recorded parallel gains during the session, while the Bloomberg Dollar Spot Index rose 0.3 percent, underscoring gold’s resilience even amid a slightly stronger greenback.
The “Debasement Trade” and Shift Away from Fiat Currencies
The move into bullion is part of a broader trend often referred to as the “debasement trade.” Investors have increasingly turned to real and digital assets — including gold, silver, and Bitcoin — as protection against what they perceive as the long-term erosion of fiat currencies.
Economic and geopolitical tensions under the Trump administration, coupled with a cycle of rate cuts and record US debt levels, have intensified concerns over the sustainability of current fiscal policies. Central-bank diversification away from the dollar has amplified that sentiment.
Analysts say these structural forces are unlikely to reverse quickly. The combination of fiscal deficits, monetary easing, and slowing growth provides a strong underpinning for gold demand, even if short-term technical corrections occur.
Outlook and Caution
At $3,932.54 an ounce as of 3:31 p.m. in Singapore, gold remains within striking distance of the historic $4,000 mark.
Ahmad Assiri, an analyst at Pepperstone Group Ltd, warned that “the risk-reward dynamics are shifting,” suggesting that a short-term pullback could emerge after such a steep ascent. Still, he described any correction as “a healthy phase within an extended rally.”
Market strategists broadly agree that as long as the Federal Reserve maintains an accommodative stance and the US shutdown continues to cloud economic visibility, investor preference for safe-haven assets will remain elevated.
For commodity funds and sovereign reserves alike, the message is clear: gold’s status as a store of value is being reaffirmed on a global scale, reshaping allocation strategies across both institutional and retail portfolios.