Traders this week witnessed a significant surge in gold prices, which exceeded $3,900 per ounce amid escalating uncertainty stemming from the U.S. government shutdown that began on Tuesday night. This development led to delays in key federal economic data releases, including the pivotal September Jobs Report, compelling traders to rely on private surveys for insight into economic conditions.
As the realities of the government shutdown set in, gold prices began their sharp ascent. On Monday, gold spot prices increased by $50 per ounce, quickly escalating to a remarkable $100 rally by midnight. Although the price chart fluctuated throughout the week, gold consistently maintained a strong foothold, rarely dropping below $3,825 or even $3,850 per ounce. A notable price swing occurred on Tuesday when a rush to lock in September profits flooded the market with sell orders, briefly pushing gold down to $3,800. However, by the close of U.S. cash markets that day, gold had rebounded to above $3,855 per ounce.
The shutdown resulted in a halt in communications from federal agencies responsible for essential macroeconomic data, particularly the Bureau of Labor Statistics, which missed its scheduled release of the September Jobs Report. Despite this, some insights emerged from private sector reports. The S&P and ISM reports provided some data points. The ISM’s Manufacturing PMI report for September showed a slight improvement, landing marginally above expectations yet still below the critical 50.0 threshold that indicates economic expansion.
In contrast, other private reports hinted at underlying concerns. The service-sector ISM survey revealed more significant than expected weakening, landing exactly at 50.0, suggesting a slowdown in U.S. consumer spending as anxiety over recessionary risks grew. The ADP’s private payroll numbers further intensified concerns, reporting a decline of 32,000 private sector jobs in September, starkly contrasting with expectations of a gain of 50,000 jobs. Additionally, the previous month’s gains were dramatically revised down to effectively zero, leaving traders anxious about labor market conditions.
While there isn’t a strong historical correlation between ADP payroll figures and the critical Non-Farm Payroll data typically released by the Bureau of Labor Statistics, the absence of BLS reporting left markets grappling with how to interpret the less favorable private data. Consequently, there has been a marked shift towards risk aversion, particularly in gold and foreign exchange trading. Support for gold has remained robust above $3,860 per ounce, with futures contracts pushing over $3,900 on Friday.
Looking ahead, uncertainty looms as traders ponder the potential impacts of the government shutdown on major asset trading and what developments might unfold in the following week, making predictions more challenging than usual. In the meantime, as traders navigate these tumultuous waters, the hope is to safely enjoy the weekend, with an eye toward next week’s market recap.
