Date: 2nd October 2025.
Gold Attempts Another Push Higher! Government Shutdown Starts Layoffs.
Gold breaks through records on Wednesday and continues to rise on Thursday as the government shutdown triggers furloughing plans. Gold has now risen more than 45% this year and is the best-performing metal after Palladium and Silver. The latest price drivers continue to be potential interest rate cuts, a weak US Dollar and the US government shutdown.
US Government Shutdown
Investors are watching closely as parts of the US government shut down yesterday after Republicans and Democrats disagreed on new funding, mainly over tax breaks tied to Obamacare. Republicans, despite holding a majority, couldn't pass a stopgap bill to keep funding through November, falling short by about a dozen votes. The result: roughly 750,000 federal workers are being furloughed, with some possibly facing permanent job losses.
The White House had previously warned the Democratic members of the Senate that if the budget does not pass, they will use the government shutdown to lay off nonessential government employees.
The Securities and Exchange Commission has furloughed 90% of staff, and the Commodities Futures Trading Commission is down to 6%. IPOs and crypto ETFs will likely stall, while the Federal Reserve and FDIC keep running due to independent funding. Nevertheless, the shutdown can trigger an economic strain and, as a result, it puts the economy at a greater risk of a downturn.
The consequence of this is a lower market sentiment and expectations of more frequent interest rate cuts. Both are known to be positive for Gold and so far have helped Gold rise to an all-time high.
Gold (XAUUSD) - Technical Analysis
After Gold rose to an all-time high on Wednesday, the price fell, particularly as the European Session overlapped the US. However, technical analysts are keen to point out that the decline is similar to previous retracements and continues to remain significantly higher than the previous low. For this reason, the price is not yet indicating a correction back to $3,791 or $3,721.
In fact, Gold's price is currently again on the rise and has regained 73% of the retracement. For this reason, technical indicators are again pointing towards the continuation of the upward trend. If the government shutdown indeed continues for a significant period, the potential for further upward price movement can rise.
XAUUSD 30-Minute Chart
According to price momentum indicators, if the price remains above $3,989.63, buy signals are likely to remain. However, if the price falls below $3,852.00, sell signals may materialize.
The Federal Reserve
The Fed's next move on monetary policy is still unclear. Last month, it cut rates by 25 basis points to 4.25%, leading many to expect a continued “dovish” stance. But since then, Fed Chair Jerome Powell and other officials have shifted to a cautious, wait-and-see approach, citing rising consumer prices and a cooling job market. Their comments lowered expectations for more rate cuts this year, disappointing traders.
However, regardless of the Fed Chairman's forward guidance, investors still expect a dovish stance. The CME FedWatch Tool shows a 98% chance that the Fed will cut rates in October and December. If the Fed makes those cuts, Gold and buyers will likely benefit.
Key Takeaways :
Gold surged over 45% this year, hitting record highs, fueled by rate cut bets and a weaker dollar.
The US government shutdown furloughed 750,000 workers, with Republicans failing to pass a stopgap funding bill.
The SEC and CFTC drastically reduced staff, stalling IPOs and crypto ETFs, while the Fed and FDIC remain operational.
Investors expect Fed rate cuts in October and December, boosting gold's momentum despite cautious comments from Powell.
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Please note that times displayed based on local time zone and are from time of writing this report.
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Michalis Efthymiou
HFMarkets
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