- Gold futures soar amid the US government shutdown and a weaker dollar.
- Receding inflation pressure, following the release of the Core PCE data, has weighed on the greenback, pushing gold up.
- Institutional appetite for gold increases with high ETF inflows and rising open interest.
Gold futures extended their rally on Wednesday, with December contracts trading above $3,920, supported by safe-haven demand, a weaker dollar, and rising odds that the Federal Reserve will pivot to rate cuts sooner than anticipated. The metal has surged 47% so far in 2025, with 11% gains in September alone, marking its best monthly performance in the past fourteen years. A combination of political instability in Washington and shifting rate expectations has given the bullion a decisive push to the upside.
The investor caution has been amplified by the US government shutdown, adding further fuel to the gold’s momentum. With more than 750,000 federal employees on furloughs and the BLS warning of a delay in the release of NFP data, traders are now paying attention to proxy data. The ADP employment change and ISM manufacturing PMI data remain the focus of attention today, as market participants seek shelter in gold futures due to heightened volatility.
Another primary driver is the weaker dollar, as the US Dollar Index has slipped more than 1% since the release of the US Core PCE inflation report. The data showed a receding inflationary pressure, reinforcing expectations that the Fed has sufficient room to initiate aggressive rate cuts. Lower yields and a softer dollar have reduced the opportunity cost of holding gold, making the precious metal an attractive hedge for investors.
Market strategists have highlighted the scale of these flows, as CNBC reported, “Gold is being supported by a softer dollar, escalating political tensions, and broader geopolitical uncertainty.” Open interest in gold futures has surged steadily in September, revealing fresh speculative long positioning rather than short-covering. Meanwhile, gold-linked ETFs have seen the most significant inflow in three years, suggesting an institutional appetite for the yellow metal.
Beyond US politics and inflation, global dynamics are also shaping the sentiment. Chinese stimulus measures to support the real estate sector have alleviated concerns about a worldwide slowdown, indirectly boosting commodity prices. Meanwhile, steady oil prices serve as a reminder of the persisting inflation risk, making gold an attractive hedge against inflation.
Looking forward, futures traders are closely watching ADP employment and ISM manufacturing data due in the New York session. Weaker data could reinforce the dovish bets and push gold towards the $4,000 mark. Conversely, resilient data could trigger profit-taking, but structural drivers may limit the downside.
