What does the US government shutdown mean for gold?
As the Senate’s stalemate brings the US government to a standstill, gold prices are reaching all new heights
Gold prices are surging once again, and this time, they are being spurred on by a constitutional gridlock that has caused the US government to shut down.
Republicans in the Senate had been pushing to pass a bill that would have extended government funding, but failed to attract the Democrat support needed to reach the 60 votes required.
Democrats were holding out for health care policy reforms in order to lend their support to the bill. Without either side having budged, both are now blaming each other for the shutdown, which will see certain parts of the US government temporarily cease to function.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
This is the first time the US government has closed down since 2018, during Donald Trump’s first term in the White House.
Assuming the shutdown isn’t too lengthy, economists don’t expect it to have a major impact on the US economy. Ryan Sweet, chief US economist at Oxford Economics, for example, has stated that the shutdown won’t change the company’s outlook for US GDP, unemployment or inflation in the near term.
But Sweet did say it could impact the timing of any future Federal Reserve (Fed) rate cuts.
“The Federal Reserve emphasized the September move as an insurance cut,” said Sweet. “A shutdown would likely leave the central bank in a fog about the labor market, fueling support for an October cut rather than risk falling behind and having to cut more later.”
Falling US interest rates are typically a bullish signal for gold investors. But this isn’t the only reason why the US government shutdown is boosting gold prices.
How the US government shutdown is boosting gold prices
The gold price rally has been ongoing since 2024. The US government shutdown is just the latest development that is fuelling its run.
It has helped make September a standout month for gold, though. Gold prices have increased 12% from $3,476 on 1 September to their latest all-time high of $3,895 a month later.
Gold is typically seen as a safe-haven asset. Political instability of any kind tends to see investors turning to the precious metal in order to protect their wealth.
That applies double when it comes to the US, given the country’s dominant position in the global economy and the dollar’s status as the world’s reserve currency.
"The US government shutdown has increased investor uncertainty, delaying Friday’s key jobs data," said Russell Shor, senior market analyst at Tradu.com. "This has strengthened demand for gold as a safe-haven asset, while expectations of further Fed rate cuts have pushed prices higher."
The shutdown is also fuelling pessimism over the US dollar, in which gold prices are typically quoted.
“The dollar slipped again overnight,” said Emma Wall, chief investment strategist at Hargreaves Lansdown on 1 October, the first day of the government shutdown. “The outlook is not positive if previous lockdowns are any indicator.”
This latest fall in the dollar further extends one of the other longer-term drivers of the gold price rally: ‘dedollarisation’.
“Emerging markets have turned away from the US dollar as a store of reserves in order to reduce their dependence on the US, instead favouring gold,” said Wall.
While a weakening dollar inherently pushes up gold prices (as it takes more dollars to buy the same amount of gold), the recent rally has transcended this impact.
“Gold prices recently hit an all-time high in real terms, exceeding the safe-haven asset’s previous inflation-adjusted peak from 1980,” said Shannon Saccocia, chief investment officer, private wealth at Neuberger.
What the US government shutdown means for gold and other investments
While gold prices rose in the days leading up to the shutdown, the reaction of the stock market was more reserved.
The S&P 500 rose for three consecutive sessions up to 30 September, the eve of the government shutdown. At time of writing, S&P 500 futures are down 0.5% on the morning of 1 October, suggesting that these gains are about to reverse.
“Historically shutdowns have been bad for the US dollar, bad for US equities, and bad for bonds too,” said Wall.
If the shutdown becomes drawn out, it could have a negative impact on the US economy.
“The economic costs increase the longer the shutdown drags on,” said Sweet. “Our estimate is that a partial government shutdown reduces GDP growth by 0.1-0.2 percentage points per week.
“For context, a shutdown that lasts the entire quarter, which has never occurred, would reduce Q4 real GDP growth by 1.2-2.4 percentage points.”
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.
Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.
Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.
-
Buying vs renting: is is better to own or rent your home?The higher mortgage rates of recent years have actually made renting comparatively cheaper, analysis suggests
-
Reeves urged to axe stamp duty from UK shares held in an ISAChancellor Rachel Reeves is reportedly considering axing stamp duty from UK shares held in stocks and shares ISAs. What could it mean for your portfolio?
-
Europe’s new single stock market is no panaceaOpinion It is hard to see how a single European stock exchange will fix anything. Friedrich Merz is trying his hand at a failed strategy, says Matthew Lynn
-
Who is Rob Granieri, the mysterious billionaire leader of Jane Street?Profits at Jane Street have exploded, throwing billionaire Rob Granieri into the limelight. But it’s not just the firm’s success that is prompting scrutiny
-
David Ellison: America's new media mogulDavid Ellison is building a mighty new force in old and new media. Critics worry that he will prove to be a Trumpian patsy. Is that fair?
-
Why investors should avoid market monomaniaOpinion Today’s overwhelming focus on US markets leaves investors guessing about opportunities and risks elsewhere
-
Can Rachel Reeves save the City?Opinion Chancellor Rachel Reeves is mulling a tax cut, which would be welcome – but it’s nowhere near enough, says Matthew Lynn
-
Was Margaret Thatcher great for Britain?The 'Iron Lady’ would be celebrating her 100th birthday this month. Margaret Thatcher rose to power in 1979 as the first ever female prime minister and was one of the most controversial leaders in history, but how did her policies shape today’s finances?
-
Pierre-Édouard Stérin wants to make France great againConservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?