By Demetris Christou, Managing Director – AGD Global
As many of you are aware, the U.S. federal government has now entered its second week of shutdown, with no solution yet in sight. While shutdowns are not unusual in American politics, the timing of this one is particularly sensitive. Global growth is slowing, inflation remains stubborn, and geopolitical risks are elevated. Together, this creates a backdrop where uncertainty is high—and gold once again takes center stage as the world’s preferred safe haven.
The Shutdown So Far
- No Deal Yet: Political negotiations remain stuck on health-care spending and budget levels.
- Operational Strain: Hundreds of thousands of federal workers are without pay, while key social programs like WIC are under pressure.
- Data Blackout: U.S. government reports on jobs, inflation, and growth are not being published. Without this data, central banks and investors are effectively flying blind.
Geoeconomic Effects
If the shutdown persists, we can expect:
- Slower U.S. Growth: Roughly $15 billion is lost each week the government remains closed.
- Global Impact: Reduced U.S. import demand and delayed contracts could spill over into global trade.
- Higher Risk Premiums: With no official data, investors demand greater compensation for risk, raising volatility across markets.
Credibility Concerns: Prolonged gridlock could dent confidence in U.S. policymaking, boosting safe-haven flows into gold.
If the shutdown persists, we can expect:
- Slower U.S. Growth: Roughly $15 billion is lost each week the government remains closed.
- Global Impact: Reduced U.S. import demand and delayed contracts could spill over into global trade.
- Higher Risk Premiums: With no official data, investors demand greater compensation for risk, raising volatility across markets.
Credibility Concerns: Prolonged gridlock could dent confidence in U.S. policymaking, boosting safe-haven flows into gold.
What This Means for Gold
Gold’s rise reflects not only the shutdown, but also the broader trend of central banks diversifying reserves, investors hedging against uncertainty, and the likelihood of easier monetary policy ahead.
Looking forward:
- If resolved quickly: Gold may consolidate, but remain supported at high levels.
- If prolonged: Expect further upside as safe-haven demand strengthens.
- If paired with Fed rate cuts: Gold could remain a strong outperformer, even alongside rising equity markets.