Gold hits record high near $3,900/z as US government shutdown begins
The US is once again staring down the barrel of a government shutdown, and the implications for investors in America and abroad are significant.
Congress has failed to pass the necessary funding bills, with the deadline expiring tomorrow. Unless lawmakers strike a last-minute deal, large parts of the federal government will grind to a halt.
Shutdowns send a damaging signal about political dysfunction in the world’s largest economy. Investors everywhere are forced to reassess risk, and that has ripple effects across asset classes and geographies.
The symbolism matters as much as the substance: the US remains the anchor of global markets, yet every episode of brinkmanship erodes that reputation.
We are already seeing consequences in market behaviour. gold has surged to fresh record highs as investors shift into safe-haven assets. Treasury yields are volatile, with history suggesting declines during shutdowns, but the rancorous backdrop and rising debt concerns could push them higher this time.
The US dollar, still the world’s reserve currency, is vulnerable to changes in confidence if investors perceive America’s political system as incapable of managing its own finances.
Shutdowns have occurred before, and the record shows they are often short. Since 1950, there have been 21 instances, most lasting only a few days. But length matters.
The 2018–2019 shutdown dragged on for 35 days, costing the economy an estimated $3 billion in permanently lost output. During that time, the S&P 500 corrected, Treasury yields slipped, and business confidence weakened.
What makes the looming shutdown more concerning is the wider context. Global growth is slowing, geopolitical risks are multiplying, and monetary conditions remain tight. In such an environment, another source of uncertainty magnifies volatility.
International capital has already been gradually reducing its exposure to US assets in recent years. A prolonged political standoff could accelerate this trend.
One underappreciated but important consequence of a shutdown is the disruption to government data releases. Agencies could halt publication of critical statistics, including jobs figures and inflation reports. Markets rely heavily on these indicators to set expectations for corporate earnings, interest rates, and currency valuations.
Without them, speculation fills the void, increasing the risk of mispricing and abrupt market swings. Reliable data is the lifeblood of informed decision-making. When it is missing, the consequences extend well beyond economists’ models — it undermines central bank policy, corporate planning, and investor sentiment.
Equities are especially exposed. While markets often shrug off short shutdowns, prolonged ones dent confidence and trigger sell-offs.
Companies that depend on government contracts or regulatory approvals can see revenues hit by delays. Consumer confidence typically falls during extended periods of dysfunction, which feeds directly into spending patterns and corporate earnings. The result is a broader drag on market performance.
The US dollar’s status also comes under pressure. Although it remains unrivalled as the world’s primary reserve currency, the repeated spectacle of funding crises makes international investors question its reliability as a safe haven. Each shutdown episode strengthens the case for diversifying away from US assets into alternatives such as gold, other currencies, and non-US equities.
For investors, the lesson is clear: do not allow political theatre to paralyse you, but be pragmatic in managing risk. Holding quality companies with strong fundamentals is as important as ever. Diversification across geographies and asset classes is critical. And alternative assets, particularly gold, are once again proving their worth as part of a balanced portfolio.
The political calculus in Washington is unlikely to improve quickly. Even if lawmakers cobble together a temporary patch, long-term agreements will remain elusive. Polarization is now so entrenched that the threat of future shutdowns is likely to persist, embedding a permanent layer of uncertainty into US assets.
Markets can tolerate economic cycles, inflationary pressures, and even shifts in monetary policy. What undermines confidence most is dysfunction at the top. Every shutdown, however temporary, chips away at America’s credibility as the dependable steward of the global economy.
The task for investors is to adapt accordingly and to hedge against US political risk by ensuring portfolios are internationally diversified, fundamentally sound, and resilient to the shocks that Washington continues to deliver.