After President Trump signed the legislation, officially ending the longest government shutdown in U.S. history, the global market immediately shifted its focus to the prospects of the Federal Reserve (Fed) cutting interest rates and the delayed economic data.
Benefiting from strong expectations for further interest rate cuts, the price of gold rose for the fifth consecutive trading day. The spot gold price rose by 0.5% in the Asian trading session, reaching $4,219.51 per ounce, hitting a new high since October 21. The December delivery price of U.S. gold futures remained near $4,220 per ounce. Supported by geopolitical tensions, trade tensions, and interest rate cut expectations, gold prices have risen by 60% since the beginning of the year.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, stated that the upward trend in gold prices is mainly driven by the weakening U.S. dollar, expectations of Fed interest rate cuts, and continuous purchases of gold by central banks.
During periods of low interest rates and economic uncertainty, non-interest-bearing gold typically performs well. He pointed out that although gold may face short-term consolidation after rapid gains, if real yields remain low and monetary policies remain accommodative, gold prices are still expected to challenge over $4,300 per ounce by the end of the year.
In addition to gold, in other precious metals, spot silver rose by 1.1% to $54.02 per ounce, approaching the historical high on October 17.
The U.S. government shutdown, which began on October 1, led to the interruption of food aid for millions of families, thousands of canceled flights, and federal workers being forced to stop working for over a month.
President Trump signed the spending bill, marking the end of the 43-day standoff. Federal government workers are expected to return to work starting Thursday.
Boosted by the positive effects of the U.S. government’s reopening, global stock markets have risen for three consecutive days, with market sentiment leaning towards optimism. S&P 500 index futures rose by 0.2%, while Nasdaq 100 index futures rose by 0.4%. Asian stock markets slightly rose by 0.4%.
However, federal bureaucratic agencies may still need several days or even weeks to fully restart and clear the backlog of work during the shutdown.
During the government shutdown, key economic indicators such as unemployment figures and the October Consumer Price Index (CPI) were not released, exacerbating the uncertainty surrounding monetary policy direction.
Michael Landsberg of Landsberg Bennett Private Wealth Management said, “Although the market has priced in the impact of the government reopening, there is still a larger hurdle in front of us, which is the resumption of the missing economic data.”
He added, “As the fog lifts, we will see whether the current market positioning is correct, whether it remains sunny, or whether significant repricing is needed.”
However, some analysts are more optimistic about the situation. Seema Shah from asset management company Principal Asset Management mentioned that as economic data releases resume, the reasons supporting the Fed’s interest rate cut in December are likely to resurface.
She believes that this outlook will strengthen risk appetite, making U.S. stocks more advantageous, especially with large tech stocks and cyclical stocks poised to benefit from the Fed’s accommodative stance.
According to a Reuters survey, 80% of economists expect the Fed to cut interest rates by 25 basis points next month to support the weakening labor market.