Gold Slips as Dollar Climbs Amid US Shutdown and French Crisis
Gold slipped while the dollar edged higher by almost 0.2%, as the US government shutdown and the political crisis in France sustained volatility in financial markets.
Bullion had risen to $3,977.44 an ounce after closing 1.9% higher on Monday. The suspension in federal operations that’s now stretching into its second week has deprived investors of key data needed to gauge the health of the US economy, while the Federal Reserve struggles to assess changing conditions. Traders are still pricing in a quarter-point cut this month, which should benefit gold as it doesn’t pay interest.
In France, Sebastien Lecornu resigned as prime minister, after failed attempts to reach a consensus on budget spending with political parties, with the deadlock thwarting attempts to rein in the largest fiscal deficit in the euro area. Meanwhile, Sanae Takaichi’s near-certain elevation as the next Japanese prime minister has also jolted financial markets.
The political shakeups in France and Japan are adding to fiscal concerns and contributing to the rally in gold, Nicky Shiels, head of research and metals strategy at MKS PAMP SA, said in a note. “A mix of retail (especially in Europe and Japan) and institutional inflows have driven” the latest surge, she said.
US President Donald Trump has set the scene for gold’s surge of around 50% this year, as his aggressive moves to reshape global trade and geopolitics spurred a flight to safety and a move away from the dollar. Central banks and gold-backed exchange-traded funds have been enthusiastic buyers, while the Fed’s interest-rate cut, and the prospect of more to come, has helped recently.
Meanwhile, the People’s Bank of China extended its gold buying streak in September for an 11th consecutive month as bullion climbed to fresh record levels.
Reflecting the positive mood, Goldman Sachs Group Inc. — a long-standing bull on gold — raised its price forecast for December 2026 to $4,900 an ounce, up from $4,300, analysts said in a note, citing ETF inflows and central-bank buying.
“I’d suggest overweight in gold — despite its high price — as a hedge against the US dollar and preparing for more shocks to come,” said David Chao, a global market strategist at Invesco Asset Management. Allocation to gold as a percentage of investors’ portfolios is likely currently in the low single digits — but a level of around 5% is “a prudent measure to me,” he added.
Spot gold slipped to $3,949.61 an ounce as of 8:49 a.m. in London, though prices are still on track for the biggest annual gain since 1979. The Bloomberg Dollar Spot Index was steady. Silver was steady above $48 an ounce. Palladium and platinum fell slightly.
Source : Bloomberg.com
