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Gold prices surged to fresh record highs in early Asian trading on Monday, supported by a sharp weakening in the Japanese yen and persistent expectations of further U.S. rate cuts amid political and economic uncertainty in Washington.
Spot gold climbed as much as 1% to $3,926.63 an ounce, while December gold futures rose 1.1% to $3,951.32, marking another all-time high for bullion. The metal extended last week’s momentum as traders sought safe-haven assets amid ongoing instability in U.S. fiscal negotiations.
Yen Slide Fuels Gold Rally
Gold’s latest upswing coincided with a steep drop in the yen following Sanae Takaichi’s election as the new leader of Japan’s ruling Liberal Democratic Party, paving her way to become the country’s next prime minister.
The USD/JPY pair spiked 1.4% to 149.58, its sharpest intraday move in weeks, after markets interpreted Takaichi’s stance as fiscally and monetarily dovish, likely favoring continued Bank of Japan (BOJ) stimulus and opposing any near-term tightening.
The yen’s decline eroded its traditional haven appeal, driving capital flows into gold, which now appears to be the preferred hedge against both currency volatility and political instability.
Political Uncertainty in the U.S. Adds Support
In the U.S., concerns over a federal government shutdown remained in focus as lawmakers failed to agree on a spending bill. The stalemate—now entering its second week—has already disrupted federal services and raised questions about economic growth momentum.
Adding to investor unease, President Donald Trump’s decision to deploy the California National Guard to Portland, Oregon, drew political backlash and lawsuits from both states, amplifying risk sentiment.
Rate-Cut Bets Bolster Metals
Gold also benefited from heightened expectations of another 25 basis-point rate cut by the Federal Reserve at its October meeting. The CME FedWatch Tool indicated traders are pricing in a 99% probability of further easing after last month’s quarter-point reduction.
Lower interest rates generally reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive to investors.
Other precious metals mirrored gold’s momentum:
- Spot platinum rose 1.2% to $1,627.17/oz
- Spot silver advanced 0.6% to $48.2955/oz, both trading near multi-year highs.
However, industrial metals lagged slightly, with LME copper up just 0.2% at $10,731.00 per ton and COMEX copper easing 0.3% to $5.0923 per pound, reflecting ongoing concerns about global manufacturing demand.
Economic Outlook
Analysts noted that as long as the U.S. government shutdown persists, gold’s rally could continue. A prolonged closure would dampen near-term U.S. data flow, including employment and inflation indicators, making it harder for the Fed to gauge real-time economic conditions.
