Gold breaks records again! Government shutdown and Federal Reserve uncertainty become the best drivers

According to the Zhitong Finance APP, on Monday, precious metal prices surged across the board, with gold climbing to a historic high. Traders are closely monitoring the potential government shutdown crisis in the United States—if the crisis occurs, the release of key employment data this week may be delayed, which could make the Federal Reserve's monetary policy path unclear.

After achieving six consecutive weeks of gains, gold prices rose another 1%, reaching a historic high of $3,798.73 per ounce, surpassing the peak set last Tuesday. Silver prices increased by as much as 1.2%, further climbing to the highest level since 2011 after breaking the $45 mark for the first time in 14 years last week. Platinum and palladium also saw significant increases. Factors supporting the rise of these precious metals include ongoing market supply tightness and continuous inflows into ETFs targeting these metals.

Senior leaders of the U.S. Congress plan to meet with President Trump on Monday, and if they cannot reach an agreement on a short-term spending bill, federal government funding will expire the next day. A government shutdown could affect the release of several key data points, including Friday's non-farm payroll report—economists expect this report to show a slowdown in U.S. job growth for September.

If the employment data is weak, it will provide more justification for the Federal Reserve to adopt an easing policy at its next interest rate decision in October. In this scenario, the appeal of non-interest-bearing precious metals will further increase. However, the outlook for the Federal Reserve's rate-cutting cycle remains highly uncertain: on one hand, there are differing views among Federal Reserve officials regarding monetary policy; on the other hand, some economic data has performed better than expected.

Additionally, traders are still continuously assessing the threats to the Federal Reserve's independence. Previously, on Thursday, Federal Reserve Governor Lisa Cook's lawyer urged the Supreme Court to allow her to continue serving during the response to Trump's firing attempts.

Barclays strategists Themistoklis Fiotakis and Lefteris Farmakis noted in a report released on Sunday that given the nature of the risk that the Federal Reserve may lose its independence, the dollar and U.S. Treasury bonds "should include a certain degree of Federal Reserve-related premium," while gold prices, in contrast, do not appear to be overvalued. They added, "This makes gold an unexpectedly high-quality hedge asset."

So far this year, gold prices have surged over 40%, driven by demand for gold purchases from major central banks and the Federal Reserve's resumption of rate cuts, with gold prices continuously reaching historic peaks. Next week, gold prices are expected to achieve a third consecutive quarterly increase, with current holdings in gold ETFs rising to the highest level since 2022. Institutions such as Goldman Sachs and Deutsche Bank have indicated that they expect the upward trend in gold prices to continue.

Meanwhile, other precious metals have also experienced unprecedented supply tightness this year. Due to the increasingly prominent issue of supply shortages over several consecutive years, the inventory of freely traded precious metals in the London market has been continuously decreasing, further exacerbating market concerns. The leasing rates for silver, platinum, and palladium (which reflect the cost of borrowing metals in the short term) have all surged significantly, far exceeding the near-zero normal levels

The Citigroup analyst team led by Max Layton stated that market concerns about the Trump administration potentially including platinum group metals in the "Section 232" critical minerals investigation have further exacerbated supply tightness in the market. In a report released on September 19, Citigroup noted that the relevant review results are expected to be announced later in October, and before that, the possibility of potential import tariffs on palladium in the U.S. has increased. On Monday, palladium reached its highest level since July