Gold Approaches $4k as Investors Weigh Shutdown

Gold edged closer to $4,000 an ounce, extending a rally fueled by the US government shutdown and the political crisis in France.Traders are still pricing in a quarter-point cut this month, which should benefit gold as it doesn’t pay interest. However, Citadel's Ken Griffin said investors are starting to view gold as a safer asset than the dollar, a development that's "really concerning" to him. Griffin stated the US is seeing fiscal and monetary stimulus akin to what normally happens during a recession, which is stoking markets. Charles Schwab Senior Investment Strategist Kevin Gordon joined Carol Massar and Tim Stenovec on 'Bloomberg Businessweek Daily' to break it down.

With traders on $4,000/oz watch for spot gold prices after futures broke through that level in the US morning session, key indicators suggest the rally can sustain its momentum.

Among them:

Extended ETF buying: holdings in physically-backed gold ETFs tracked by Bloomberg rose again Monday after swelling for six straight weeks, the most since April; another monthly gain in October would make it the longest streak since last year.

October is seasonally a favorable month for gold, being the fifth best of the year in data going back a decade. It helps a period of strong physical buying is approaching with wedding season and Diwali in India.

Key central banks keep adding gold: The top year-to-date purchaser has been the National Bank of Poland, according to the World Gold Council, which wants to raise the target gold share within its international reserves from 20% to 30%. And China’s PBOC, another top buyer, also added to its holdings in September for an 11th consecutive month. Between 2022 and 2024, monthly purchases stretched for 18 straight months, indicating it has room to extend.

Lack of compelling hedges: rising fiscal risks globally, elevated term premia and attacks on US institutional credibility have made Treasuries a less appealing hedge for many investors (including BlackRock, the world’s biggest asset manager). Big-name investors say gold is even safer than the dollar. Bitcoin is, of course, another option but may be viewed as too volatile and speculative.

Still, there are also growing headwinds when it comes to gold’s outlook. It is expensive to most metrics you’d measure it against, and a rebounding dollar may slow its ascent. It’s also unclear how long can central banks overlook these lofty prices. Fellow blogger Nour Al Ali argues for a period of consolidation. However, none of those challenges have proved potent enough t

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