Gold Hits Record $3,800 Amid U.S. Shutdown Fears and Fed Uncertainty

Economic

Commodity

Summary:

Gold surged to a new record above $3,800 per ounce, driven by concerns over a potential U.S. government shutdown and uncertainty surrounding Federal Reserve rate decisions....

Gold prices reached a new all-time high above $3,800 per ounce as traders weighed the potential economic fallout from a U.S. government shutdown and the uncertainty around the Federal Reserve’s upcoming policy decisions. Bullion surged as much as 1.4%, eclipsing previous records set earlier in the week, with silver, platinum, and palladium also experiencing strong gains.

U.S. Shutdown and Impact on Economic Data

The uncertainty surrounding a potential U.S. government shutdown has added fuel to the gold rally. With federal funding set to expire and no agreement yet on a short-term spending bill, a shutdown would delay the release of key economic data, including the crucial September payrolls report. Economists expect the report to show subdued jobs growth, which could influence the Federal Reserve’s decision on interest rates in October. A weaker dollar, resulting from these fears, makes precious metals cheaper for foreign buyers, further boosting demand.

The prospect of weaker U.S. employment figures would support the case for further easing by the Federal Reserve, making non-interest-bearing precious metals like gold more attractive. However, there remains a high degree of uncertainty about the Fed’s future rate-cutting cycle, with divergent views among Fed officials on the path forward. Despite this, gold’s rise has been bolstered by central bank demand and expectations of a continued rate-cutting cycle.

Concerns Over Fed's Independence

Adding to the uncertainty, there are growing concerns about the potential loss of independence for the U.S. central bank. Fed Governor Lisa Cook’s legal battle over attempts to remove her from office has raised questions about the Fed’s future stability, further driving demand for gold as a hedge against potential financial and political risks. Barclays strategists highlighted that, despite the risks, gold remains a surprisingly attractive value hedge in the current environment.

Gold's Strong Performance in 2025Gold has surged 45% in 2025, hitting successive peaks as the Fed has resumed interest-rate cuts and central banks around the world have increased their gold holdings. The metal is on track for its third consecutive quarterly gain, with holdings in bullion-backed ETFs at their highest levels since 2022. Analysts from Goldman Sachs and Deutsche Bank have indicated that the rally is likely to continue.

Gold’s gains were matched by surging prices in other precious metals, which are facing unprecedented market tightness. Silver, platinum, and palladium have seen significant price increases, partly due to dwindling stockpiles and concerns about supply shortages. Lease rates for these metals have soared, reflecting increased borrowing costs. Platinum-group metals, in particular, face additional risks due to Trump’s Section 232 investigation into critical minerals, with potential U.S. import tariffs on palladium expected by the end of October.

Market Reaction

As of 1:50 p.m. in Singapore, spot gold was trading 1.5% higher at $3,818.69 an ounce. The Bloomberg Dollar Spot Index had dropped 0.2%. Silver reached its highest price since 2011, rising 1.5% to $46.76 per ounce. Platinum climbed 2.6% to trade above $1,600 per ounce for the first time since 2013, while palladium gained 2.4%, hitting its highest point since July.

Gold’s record surge reflects growing concerns about global economic risks, particularly the uncertainty surrounding the U.S. government shutdown and the Federal Reserve’s future rate decisions. With strong demand for precious metals and market tightness across the sector, gold and its peers remain attractive to investors seeking safety and value in an uncertain economic environment. As geopolitical and financial risks continue to drive demand, the upward trend in precious metal prices is likely to persist.

Source: Bloomberg

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Samantha Luan

Economic

Stocks

Forex

The Indonesian rupiah rebounded on Monday from a near five-month low as the central bank kept up its guard to ensure the currency's stability, while most Asian peers edged higher against a wobbly US dollar.Equities in emerging Asia rose slightly as investors assessed the fallout of a possible shutdown of the US government that would threaten release this week of jobs data, key for markets to bet on the Federal Reserve's (Fed) easing path.

Those concerns kept pressure on the US dollar index, which slipped 0.2% against a basket of major currencies."The shutdown can hinder the release of the key government-produced data, such as the NFP, and result in more focus on the other indicators," Maybank analysts said in a note.An MSCI index of emerging-markets Asia equities added 1%, largely driven by South Korea's Kospi, which rebounded more than 1% from last Friday's two-week low on hopes of dividend-friendly tax reforms.

Hong Kong-listed shares of Tencent and Alibaba jumped up to 3% each.

In Southeast Asia, Indonesia's currency rose up to 0.5%, to stand at 16,650 against the dollar, after ending last week near its weakest since April 30.That depreciation of about 0.9% prompted the central bank to intervene in financial markets to stabilise the currency.Bank Indonesia's surprise rate cut, its "burden sharing" deal with the government, and the abrupt exit of a respected finance minister are fuelling investor fears about political interference.

That has raised doubts about the central bank’s independence and the credibility of economic policy in Southeast Asia's largest economy."The rupiah will continue to be volatile in the short term, given increased political noise, lower policy visibility, and headline risk," said Massimiliano Bondurri, the founder and chief executive officer of SGMC Capital."This being said, for long-term investors current levels are attractive to enter the currency and take advantage of recent depreciation."

Indonesia is due to issue this week inflation data for September, though the central bank's shifting focus on growth implies it could have little bearing on the monetary policy stance.Analysts broadly expect 50 basis points of rate cuts over the next two quarters.Elsewhere, the ringgit, Singapore dollar, and the Philippine peso firmed between 0.2% and 0.1%.The Thai baht meandered around 32.25 a dollar, while South Korea's won gained 0.7% and the Chinese yuan rose 0.2%.Among equity markets, the benchmark index in Manila fell 0.2%, while those in Jakarta and Singapore added between 0.2% and 0.6%.Stocks in Thailand surged as much as 0.9%, as the new prime minister outlined measures to fire up a sluggish economy.

Source: Theedgemarkets

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Gerik

Economic

In a significant policy shift, China has reduced its annual output growth target for major non-ferrous metals, including copper and aluminum, for the years 2025 and 2026. The new target, set at an average growth of 1.5% annually, marks a stark contrast to the previous two-year blueprint, which aimed for a 5% growth rate. This reduction underscores China's move towards balancing supply security with efforts to upgrade the industry and prioritize sustainability.

Reasons Behind the Target Cut

The decision to lower the output growth target reflects a broader strategy by Beijing to shift from an expansion-driven model to one focused on efficiency and sustainability. Years of rapid capacity additions, particularly in aluminum, copper, and battery materials, have led to periods of oversupply, resulting in profit squeezes for producers. In light of these challenges, the government is now focusing on curbing oversupply and ensuring the industry’s long-term viability through more controlled growth.

Alongside reducing output growth, China is placing a greater emphasis on recycling and secondary metal production. The country aims for annual secondary metal output to exceed 20 million tons by 2026, as part of its broader efforts to reduce environmental impact. Additionally, China is expanding support for the reuse of materials such as waste batteries, solar panels, and scrap metals, reinforcing its commitment to a circular economy.

Innovation and Global Competitiveness

China's revised roadmap also highlights the importance of technological advancements in the metals industry. The plan aims to achieve breakthroughs in high-end products, such as ultra-high purity metals and advanced rare earth materials. These initiatives are designed not only to improve the sustainability of the sector but also to enhance the global competitiveness of Chinese companies, particularly in light of increasing trade measures imposed by other countries.

The announcement had an immediate impact on metal markets. Copper prices rose as much as 1.1%, reaching $10,279.50 per ton on the London Metal Exchange, reflecting investor optimism about the shift in policy. Other metals, including aluminum and zinc, also saw slight price increases, indicating that the market is absorbing the news positively despite the lowered growth targets.

China's decision to scale back its metals growth target aligns with its broader economic and environmental goals, focusing on more sustainable and efficient industry practices. While the reduced growth targets may signal a shift away from rapid expansion, they also point to a more strategic approach that emphasizes innovation, recycling, and global competitiveness in the face of oversupply issues. As China continues to focus on high-end metal products and sustainability, the long-term impact on both domestic producers and global metal markets will be closely watched.

Source: Reuters

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Asian share markets began the week on a cautious note, as investors braced for the potential impact of a U.S. government shutdown. This would delay important data, including the September payrolls report, and could complicate policy decisions for the Federal Reserve. With the shutdown risk looming, market sentiment was subdued ahead of critical political and economic events.

Shutdown Threat and Economic Uncertainty

The primary concern for markets is the potential shutdown of the U.S. government, which could begin on Wednesday unless a funding agreement is reached. President Donald Trump is set to meet with top Congressional leaders to discuss extending government funding. If no deal is made, the government would shut down, and new U.S. tariffs on goods such as heavy trucks and pharmaceuticals would take effect.

A prolonged shutdown could leave the Federal Reserve without the crucial economic data needed to guide its policy decisions ahead of its meeting on October 29. Analysts at Bank of America (BofA) noted that if the shutdown continues beyond the Fed meeting, it would likely rely on private data for decision-making, marginally reducing the likelihood of an October rate cut. However, they also estimated that each week of a shutdown would only subtract 0.1% from U.S. economic growth, with minimal impact on financial markets in the past.

Global Market Reactions

Asian stocks were mixed in response to these developments. Japan’s Nikkei fell by 0.7% after a strong 6% rise earlier in the month, while South Korea’s KOSPI rebounded by 1.2%, bringing its monthly gains to 6.3%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 0.4%, marking nearly 4% growth for the month. Meanwhile, S&P 500 and Nasdaq futures were both up 0.2%, while European indices like the EuroStoxx 50, FTSE, and DAX futures also gained 0.3%.

In bond markets, U.S. Treasury yields found support at 4.17% after being pressured by stronger-than-expected economic data last week. As expectations for a less aggressive Fed rate cut evolved, the dollar index held steady at 98.134. The euro remained at $1.1708, within its recent range, while the dollar strengthened against the yen to 149.49 yen after a 1% rally last week.

Commodities and Gold Prices

In commodity markets, gold remained just below its record high at $3,764 an ounce, buoyed by continued concerns about global economic stability. Meanwhile, oil prices slipped after the resumption of crude oil flows from Iraq’s Kurdistan region to Turkey for the first time in two and a half years. OPEC+ is expected to approve another oil production increase of at least 137,000 barrels per day at its upcoming meeting, which added to downward pressure on prices. Brent crude fell 0.8% to $69.57 per barrel, while U.S. crude dropped 0.9% to $65.14 per barrel.

Investors are navigating a period of heightened uncertainty, with the U.S. government shutdown and its potential impact on economic data and Fed policy decisions looming large. While global markets remain somewhat resilient, the risks of delayed economic data and further geopolitical developments are keeping sentiment cautious. As the shutdown threat continues, market participants will closely monitor how it affects economic growth, financial stability, and central bank actions in the weeks ahead.

Source: Reuters

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Oil prices took a step back on Monday after a series of developments that may increase global supply. Iraq's Kurdistan region resumed crude oil exports through Turkey after a two-and-a-half-year hiatus, and OPEC+ indicated it would increase production in November. These factors weighed on oil prices, despite a strong finish to last week.

Kurdistan Exports Resumed

The resumption of crude exports from Iraq's Kurdistan region added pressure on oil prices. Over the weekend, oil began flowing through a pipeline from the semi-autonomous Kurdish region to Turkey for the first time in over two years. This development came after an interim deal between Iraq's federal government, the Kurdistan Regional Government (KRG), and foreign oil producers operating in the region. The agreement is expected to bring 180,000 to 190,000 barrels per day (bpd) of crude to Turkey's Ceyhan port, with future expectations of up to 230,000 bpd reaching international markets. This return of supply is significant as it comes at a time when OPEC+ is already planning to boost output, adding to global supply.

OPEC+ plans another production increase in November, which has contributed to a downward trend in oil prices. Sources suggest that the group may approve an output hike of at least 137,000 bpd, driven by rising oil prices and an effort to regain market share. Despite this, OPEC+ has been producing nearly 500,000 bpd less than its targets, defying expectations of a supply glut. This underproduction has kept oil prices relatively firm, with last week's significant gains offering some support.

Global Market Outlook and Price Trends

Brent crude futures fell by 0.90% to $69.50 a barrel, while U.S. West Texas Intermediate (WTI) crude declined by 0.99% to $65.07 a barrel. Both benchmarks had risen sharply last week, with Brent and WTI gaining more than 4%, marking their biggest weekly increase since June. This increase was driven by geopolitical tensions, notably Ukraine’s drone attacks on Russian energy infrastructure, which disrupted Russia’s fuel exports.

While oil prices experienced a dip on Monday, the balance between increasing global supply and geopolitical uncertainties remains crucial to price movements. The resumption of Kurdish exports and OPEC+'s decision to hike production in November are adding supply pressure, but the market's near-term outlook remains tight, influenced by ongoing geopolitical events. As oil prices continue to adjust, market participants will keep a close watch on these developments and their long-term implications for global oil prices.

Source: Reuters

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The Bank of Japan (BOJ) is facing mounting pressure to tighten its monetary policy sooner than anticipated. Following a split decision at the BOJ’s policy meeting this month, with two board members advocating for a rate hike, the prospect of an interest rate increase in October has moved closer to reality. While the central bank kept rates steady at 0.5% in September, the dissenting votes signaled a shift in the board's stance, highlighting growing concerns over inflation and Japan's economic outlook.

A Growing Divide at the BOJ

Governor Kazuo Ueda’s cautious approach to rate hikes contrasts sharply with the increasing hawkishness of other board members. Since taking office in 2023, Ueda has implemented Japan’s first rate hike in 17 years but has recently grown more wary about future tightening. However, the dissent of Naoki Tamura and Hajime Takata in the September meeting signals a shift towards more aggressive action, suggesting the central bank is becoming less concerned about economic risks. While the exact timing of the next rate hike remains uncertain, some analysts believe the split vote was a deliberate signal to push Ueda to act more decisively.

The market is closely watching the upcoming economic data to determine whether a rate hike will be feasible in October. Data such as the BOJ’s "tankan" business survey, due on October 1, will provide insights into how U.S. tariffs are affecting Japanese businesses. Additionally, reports from regional BOJ branches will shed light on the impact of tariffs on smaller firms. Analysts suggest that any easing of concerns about a U.S. recession and the potential resilience of Japanese manufacturers could sway the board towards a rate hike. With the yen weakening near the critical 150 mark against the dollar, rising inflationary pressures from import costs may further tilt the scale toward tightening.

Internal Dynamics and Political Influence

The internal dynamics at the BOJ have shifted with the departure of several dovish policymakers and the arrival of more neutral or hawkish members. As a result, Ueda’s position as the most cautious board member has become more pronounced. Some analysts remain skeptical about whether enough data will materialize by the BOJ’s October meeting to convince Ueda to raise rates. Furthermore, political factors, including the resignation of Prime Minister Shigeru Ishiba, may influence the rate decision. With concerns about political interference in monetary policy fading, the BOJ’s independence appears to remain intact, leaving the decision to the economic data and inflation trends.

The push for a rate hike reflects growing concerns about persistent inflation, particularly in food prices, and the potential impact of a weakening yen. While Ueda has stressed the downside risks to the economy, some board members argue that the time for tightening is fast approaching. If inflationary pressures continue to mount, the BOJ may be compelled to act. Despite Ueda’s caution, the ongoing divergence in board opinions suggests that the BOJ is preparing for a possible tightening phase, with October emerging as a potential starting point.

The BOJ's shifting stance reflects a broader debate within the central bank about the appropriate timing for monetary tightening. While Ueda remains cautious, the increasing hawkishness of other board members and mounting inflationary pressures suggest that a rate hike may be closer than previously thought. With key economic data on the horizon and the yen’s decline adding urgency to the situation, the BOJ could act swiftly in the coming months, marking the start of a new phase in Japan’s monetary policy.

Source: Reuters

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The US dollar found itself on the defensive on Monday, with significant economic data expected to provide insights into the Federal Reserve's future rate decisions. Additionally, rising concerns over a potential government shutdown added pressure on the currency, as market participants await further clarity on fiscal and monetary policy directions.

Currency Movements and Economic Uncertainty

Currency markets were relatively subdued during the early Asian session. However, the dollar gave up some of its recent gains following last week's stronger performance, which was bolstered by reduced expectations of imminent Federal Reserve rate cuts. The dollar fell 0.2% against the Japanese yen, reaching 149.24, after rising by over 1% the previous week. Meanwhile, the euro and the British pound saw modest gains, rising 0.15% to $1.1717 and 0.11% to $1.3418, respectively.

Investor attention was primarily focused on the looming risk of a US government shutdown, which could occur if Congress fails to pass a funding bill before the fiscal year ends on Tuesday. A shutdown would result in parts of the government closing on Wednesday, the first day of the US government’s 2026 fiscal year. This scenario is raising questions about the release of the crucial nonfarm payrolls report scheduled for Friday. Ray Attrill, head of FX research at National Australia Bank, noted that if the shutdown happens, the jobs report might be delayed or not released at all, creating further market uncertainty.

Market Sentiment and Economic Data

Investors are also anticipating a series of US economic data releases this week, including job openings, private payroll figures, and the ISM manufacturing PMI, all of which could offer clues about the health of the US economy. Recent data has been stronger than expected, challenging market forecasts for aggressive Fed rate cuts. Currently, markets are pricing in about 40 basis points of easing by December, a shift from earlier expectations for larger cuts.

In other currency markets, the Australian dollar rose 0.15% to $0.6557, while the New Zealand dollar gained a slight 0.07% to $0.5780. The Reserve Bank of Australia will announce its rate decision on Tuesday, with expectations for the central bank to maintain current interest rates.

The US dollar is navigating a period of heightened uncertainty, driven by both economic data and the looming risk of a government shutdown. While the outlook for the currency remains tied to the Federal Reserve's rate path, the market's focus on fiscal concerns and key economic indicators will likely determine the dollar's direction in the coming days. As the week unfolds, investors will closely monitor both the potential government shutdown and the upcoming economic releases for clearer guidance on the US economy's trajectory.