The price of gold soared above $3,800 an ounce for the first time yesterday as thoughts of a possible US government shutdown rattled financial markets.
The precious metal rose as high as $3,831 – taking gains for the year to 45% – as investors, worried about federal finances in Washington, looked for somewhere safe to put their cash.
US President Donald Trump held talks with Democrat and Republican leaders yesterday in a bid to negotiate an extension of government funding.
Without a deal, a federal shutdown would begin tomorrow.
Neil Wilson, UK investor strategist at online trading platform Saxo Markets, said ‘the budget impasse holds a mirror up to longer-term concerns about fiscal deficits and unsustainable spending’ in the US.
Silver was also on the march, hitting a 14-year high, while platinum hit levels not seen for 12 years.
Safe haven: Gold rose as high as $3,831 as investors, worried about federal finances in Washington, looked for somewhere safe to put their cash
Hopes of further interest rate cuts in the US – as well as worries about inflation and geopolitical tensions – also boosted the price of precious metals.
‘Investors are increasingly jumping on the gold bandwagon as safe-haven demand remains strong,’ said David Morrison, senior market analyst at online broker Trade Nation.
‘The looming threat of a potential US government shutdown added to gold’s appeal, amplifying the metal’s role as a hedge against uncertainty.’
The rally in the price of bullion has been given extra legs by investors piling into gold-backed exchange traded funds (ETFs) which track the value of the precious metal.
Central banks around the world have also been buying gold as worries grow over the strength of the dollar.
‘The fact that ETF demand has re-entered the scene so forcefully means that there are two forms of aggressor bids for gold, from central banks and ETF investors,’ wrote analysts at Deutsche Bank in a report.
Michael Haigh, head of commodities research at French banking giant Societe Generale, said the prospect of ‘lower rates and sustained inflation’ was boosting demand for gold.
And John Reade, senior market strategist at the World Gold Council, said that fear of missing out, or ‘Fomo’, was playing its part in the rally.
The London stock market also made gains despite concerns over the US and UK economies.
The FTSE 100 rose as high as 9354 – just a shade below the all-time record intra-day peak of 9357 hit last month – before closing up 0.2 per cent, or 15.01 points, at 9299.84.
The Footsie is up more than 12 per cent so far this year.
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