Online Reporter
Gold clung to an all time high, pushing closer to US$4 000 an ounce, as the US government shutdown and a political crisis in France injected more uncertainty into financial markets. Bullion rose to US$3 977.44 an ounce after closing 1,9 percent 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 percent 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. — Bloomberg
